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Topic
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Cook Company had the following investment portfolio of stocks that were purchased during 2010.
Stock Classification Cost Fair Value 12-31-10
Company R Available-for-sale $30,000 $32,000
Company S Trading $42,000 $46,000
Company T Available-for-sale $15,000 $18,000
Cook elects to use the fair value option for reporting all of its financial assets. What is the unrealized gain recognized on the income statement in 2010?
A. $0
B. $4,000
C. $5,000
D. $9,000
Answer D is correct. Cook elects to use the fair value option. Cook will value both its trading securities and available-for-sale securities at fair value, and record the unrealized gains in earnings for the period. The gain is equal to $96,000 ($32,000 + $46,000 + $18,000) minus $87,000 ($30,000 + $42,000 + $15,000), or $9,000.
I thought unrealized G/L for trading go to earnings (I/S) and unrealized G/L for AFSS go to OCI but Wiley is saying different?
Can someone please clarify?
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