An investor in trading securities has the following information available at December 31,2012: How does the investor report the change in market value on the trading securities at December 31,2012?
A)unrealized loss of $1,000 on income statement
B)unrealized gain of $1,000 on income statement
C)$1,000 is added to other comprehensive income account on the balance sheet
D)$1,000 is subtracted from the other comprehensive income account on the balance sheet

Question

An investor in trading securities has the following information available at December 31,2012:  How does the investor report the change in market value on the trading securities at December 31,2012?
A)unrealized loss of $1,000 on income statement 
B)unrealized gain of $1,000 on income statement 
C)$1,000 is added to other comprehensive income account on the balance sheet 
D)$1,000 is subtracted from the other comprehensive income account on the balance sheet

Quizplus · Accepted Answer

The increase in market value would result in an unrealized gain, which should be reported on the income statement under "Gain on Trading Securities." Therefore, the best choice is B, unrealized gain of $1,000 on income statement. The other choices are incorrect because an unrealized loss would result in subtraction, not addition, from comprehensive income, and it would also be reported on the income statement, not the balance sheet.

An Investor in Trading Securities Has the Following Information Available