Available-for-sale investments:
Available-for-sale investments are the investments in debt or equity securities, where the investor wishes to holds less than 20% of voting stock, and neither referred as trading or hold-to-maturity investments. For debt securities, the investor do not wish to hold it till maturity, and hence reported either as current assets or as long-term assets in the
Fair value:
Fair value refers to the price of the securities in the market, if the company has decided to sell the securities.
Unrealized-gain or Unrealized-loss:
Unrealized-holding gain or loss occurs when the investor company record the investments at its fair value, in its financial statements, without disposing (selling) them. When the cost of the investment is lesser than the fair value of the investment, then it is unrealized-gain. On the contrary, when the cost of the investment is greater than the fair value of the investment, then it is unrealized-loss.
Where the unrealized holding gain or loss on the available-for-sale investment is reported on the financial statements.
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Chapter 10 Solutions
HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
- Demonstrate how to identify and account for equity investments classified forreporting purposes as fair value through net incomearrow_forwardWhat is the fair-value option for reporting equity method investments? How do the equity method and fair-value accounting differ in recognizing income from an investee?arrow_forwardHow would a debit balance in Unrealized Gain (Loss) on Available-for-Sale Investments be reported in the financial statements? Is it better to have an unrealized or realized gain and what are the effects on your bottom line? Also, how are the balance sheet and income statement affected by fair value accounting?arrow_forward
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