Question

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On October 12, 2017, Neptune Corporation invested $700,000 in short-term available-for-sale marketable securities. The market value of this investment was $730,000 at December 31, 2017, but had slipped to $725,000 by December 31, 2018.

Assuming Neptune does not sell this investment, the financial statements prepared at December 31, 2018 will report:

Multiple Choice

A. The asset Investments in Marketable Securities of $725,000, and a $5,000 Unrealized Holding Loss deducted from total stockholders' equity.

B. Investments in Marketable Securities of $700,000, reduced by a $30,000 Unrealized Holding Gain on Investments, in the asset section of the balance sheet.

C. The asset Investments in Marketable Securities of $700,000 in the balance sheet, and a $25,000 Unrealized Holding Loss on Investments in the income statement.

D. Investment in Marketable Securities of $725,000 in the asset section of the balance sheet, with a $25,000 Unrealized Holding Gain on Investments included in the stockholders' equity section.

Answer 1

In financial statements In balance sheet short term investment available for sale of securities should be reported on fair value of investment and unrealized gain or loss should be included in stockholder's equity.

so in this question 725,000 should be reported as asset investment in marketable securities and (725,000-700000) = 25,000 unrealized gain should be reported in stockholder's equity.

so answer is D) The asset Investments in Marketable Securities at $725,000, and a $25,000 Unrealized Holding Gain included in total stockholders' equity