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On January 14, 2017, Miller Company purchased the $300,000, 6% face-value bonds of Barney Company for...

On January 14, 2017, Miller Company purchased the $300,000, 6% face-value bonds of Barney Company for $309,000. Miller planned to hold the bonds for several years, but not until their maturity. On December 31, 2017, the bonds had a market value of $306,500. Where would Miller Company report the unrealized holding gain or loss on this investment as of December 31, 2017?

In the “Other gain/loss” section of the Income Statement
In the “Accumulated Other Comprehensive Income” section of the Balance Sheet
On the Statement of Retained Earnings.
None of these answers are correct.
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Answer #1

Answer: None of these answers are correct.

Investments in securities can be classified into 3 types.

1) Held for trading

2) Held till maturity

3) Available for sale

Held for trading are those securities which are bought with the intention to sell them in the short term (within a year).

Held till maturity are those securities which are bought with the intention to hold it till maturity.

Investments which does not belong to first 2 categories fall under investments available for sale.

In this case since they have the intention to hold it for several year but not until maturity the bond is to be classified as available for sale investments. And any unrealized gain/loss from available for sale investments need to be disclosed in other comprehensive income section of the income statement. But since this is not one of the first 3 options the correct answer is None of these answers are correct.

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