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On January 1, Butte Company\'s Valuation Allowance for Trading Investments accou

ID: 2456771 • 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, $18,000

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

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

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

Explanation / Answer

Unrealised loss of 5200

Fair value of investments = 98000

Book value of investments = Cost Of investments + Valuatiotion allownace for trading investments

= 80000+23200 i.e 103200

Unrealised loss = 103200-98000 i.e 5200 loss

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