ssasasas A company buys debt securities for $2,000 on December 31, year 1. The debt securities areclassified as available-for-sale. The company does not elect to use the fair value option forreporting its available-for-sale debt securities. The fair value of the securities increases to $7,000on December 31, year 2, and to $9,500 on December 31, year 3. On December 31, year 3, thecompany sells the securities at fair value. Assume the company has a tax rate of 30%. What is theamount of the reclassification adjustment to other comprehensive income on December 31, year3? A. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit

Financial instruments known as debt securities give their owners the right to receive interest…

Answered: amount of the reclassification…

amount of the reclassification adjustment to other comprehensive income on December 31, year 3? A. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter19: Deferred Compensation

Section: Chapter Questions

Problem 52P

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Question

ssasasas

A company buys debt securities for $2,000 on December 31, year 1. The debt securities are
classified as available-for-sale. The company does not elect to use the fair value option for
reporting its available-for-sale debt securities. The fair value of the securities increases to $7,000
on December 31, year 2, and to $9,500 on December 31, year 3. On December 31, year 3, the
company sells the securities at fair value. Assume the company has a tax rate of 30%. What is the
amount of the reclassification adjustment to other comprehensive income on December 31, year
3? A. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit

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