Carpark Services began operations in 20X1 and maintains long-term investments in
ID: 2438321 • Letter: C
Question
Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sales ecurities. 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, 20X2 is: Available-for-sale Securities December 31, 20xi December 31, 20x2 December 31, 2ex3 Cost Fair Value $285,000 $269,908 $368,000 $387,500 $438,800 $485,000 02:0101 Mutiple Choice Debit Fair Value Adjustment- Avalable-for-Sale (LT) $19,500 Credit Unrealized Gain-Equity. $19.500 Debit Unrealized Gain-Equty $19,500, Credt Fair Value Adjustment-Avallable-for-Sale LT) $19.500 Debit Fatr Value Adjustment- Avallable-for-Sale (LT) $35,500 Credit Unrealized Loss-Equity $16.000, Credt Unrealized Gain-Equity, $19,500. Dobit Fair Value Adjustment- Avaliliable-for-Sale L.T) $19.500, Credit Unrealized Loss- Equity $19,500. Debit Fair Value Adjustment-Avalable-for-Sale LT) $35.500, Credit Unrealized Galn- Equity $16,000Explanation / Answer
Fair value securities are initially recorded at cost and the cumulative unrealized gain or loss is accumulated in accumulated other comprehensive income.
Unrealized gain = 387,500 - 368,000 = 19,500
The answer is - Debit fair value adjustment - Available for sale (LT) $19,500. Credit Unrealized gain - Equity $19,500