On May 1,Franke Co.purchases 2,000 shares of Computech stock for $25,000.This investment is considered to be an available-for-sale investment.On July 31 (Franke's year-end),the stock had a market value of $28,000.Franke should record a credit to Unrealized Gain-Equity for $3,000.

Question

Quizplus · Accepted Answer

Since Franke Co. is holding the stock as an available-for-sale investment, any unrealized gains or losses should be recorded in a separate equity account called "Unrealized Gain or Loss-Equity," which captures the increase or decrease in fair value of the investment. In this case, the stock has gone up in value by $3,000, so Franke should record a credit to Unrealized Gain-Equity for that amount.