Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale securities.The year-end cost and fair values for its portfolio of these investments follow.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X1 is:
$\begin{array}{|l|l|r|}
\hline \text { Available-for-Sale Securities } & \text { Cost } & \text { Fair Value } \
\hline \text { December } 31,20 \mathrm{X} 1 & \$ 250,000 & \$ 241,000 \
\hline \text { December } 31,20 \mathrm{X} 2 & \$ 340,000 & \$ 350,000 \
\hline \text { December } 31,20 \mathrm{X} 3 & \$ 410,000 & \$ 415,00 \mathrm{0} \
\hline
\end{array}$
A) Debit Unrealized Gain- Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT) $9,000.
B) Debit Unrealized Loss - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT) $9,000.
C) Debit Unrealized Loss - Income $9,000; Credit Fair Value Adjustment - Available-for-Sale (ST) $9,000.
D) Debit Fair Value Adjustment - Available-for-Sale (LT) $9,000; Credit Unrealized Loss - Equity $9,000.
E) Debit Fair Value Adjustment - Available-for-Sale (LT) $9,000; Credit Unrealized Gain - Equity $9,000.

Question

Quizplus · Accepted Answer

The fair value of the securities is less than the cost by $9,000 ($250,000 - $241,000), indicating an unrealized loss. The correct entry is to debit Unrealized Loss - Equity and credit Fair Value Adjustment - Available-for-Sale (LT) for $9,000.

Carpark Services Began Operations in 20X1 and Maintains Long-Term Investments