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On January 1, Butte Company’s Valuation Allowance for Trading Investments accoun

ID: 2425664 • Letter: O

Question

On January 1, Butte Company’s Valuation Allowance for Trading Investments account has a debit balance of $23,200. On December 31, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Butte report on the income statement for the current year?

A. an unrealized loss on trading investments, $5,200

B. an unrealized gain on trading investments, $5,200

C. an unrealized gain on trading investments, $18,000

D. an unrealized loss on trading investments, $18,000

Explanation / Answer

answer D : an unrealised gain on trading investment $18,000

($80,000 - $98,000 = -18,000)

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