[rlsrapp]

Just want to make sure I have this right…
When the investment in AFS is sold, gain or loss is the difference between cost and proceeds. HOWEVER, when a trading security is sold, gain or loss is the difference between carrying value and proceeds. Is this distinction correct?
Also….what happens to any previously recorded unrealized gain or loss on a trading security that is sold? Does anyone have the journal entries for this?

[vodrldnr]

Trading : you record the trading at FV and any holding gain or loss is reported on Income statement.

AFS : any holding gain or loss are reported as OCI

the previously recorded holding gain or loss is reflected in the current value of Trading security.

let say, your trading security is..

7/1 X1 $100 (you acquire trading at $100)

11/31 x1 $200 ( holding gain $100)

on 12/31, you sell it at $250

then you will have the gain from disposal of trading security $50

what happened to the previous holding gain 100??? it is reflected on the Fair value of Trading security.

visually, it is like this
Fv of trading $100 —- ( +holding gain $100) —–Fv of trading $200

[Author]

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