Consider the following facts: - Company C purchased investments in 2015 for a co

Question

Consider the following facts: - Company C purchased investments in 2015 for a cost of $200,000. - Company C recorded its investments as trading securities. - On December 31, 2015, the investments had a market value of $250,000. - On December 31, 2016, the investments had a market value of $230,000. On December 31, 2016, Company C must make a journal entry that includes: a credit to Unrealized Holding Gain/Loss-Trading Securities of $30,000 a debit to Unrealized Holding Gain/Loss-Trading Securities of $30,000 a credit to Unrealized Holding Gain/Loss-Trading Securities of $20,000 a debit to Unrealized Holding Gain/Loss-Trading Securities of $20,000 None of these answers are correct.

Explanation / Answer

Correct answer is - a debit to Unrealized Holding Gain/Loss-Trading Securities of $20,000.

Complete entry would be

Unrealised Holding Gain/Loss Dr. 20,000

To Investment A/c 20,000.

Note: 20,000 beacuse in dec 2015 we have incresed the invetment by 50,000. Therefor in 2016 the value of investment in books of C company would be 2,50,000.

In Dec 31, 2016, market value is 2,30,000. Hence, we will have to decrease the investment's value by 20,000 (250,000-230,000)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.