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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

If Valuation Allowance for Available-for-Sale Investments has a credit balance, how is it treated on the balance sheet?

To determine

Available-for-sale securities: These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.

To describe: The accounting treatment of credit balance of Valuation Allowance for Available-for-Sale Investments

Explanation

Accounting treatment:

  • Valuation Allowance for Available-for-Sale Investments is the account used to carry on the original cost of the investment.
  • If the fair value of available-for-sale investment decreases, the decrease amount is reported by debiting Unrealized Loss on Available-for-Sale Investments account, and crediting Valuation Allowance for Available-for-Sale Investments account...

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