Question

Unrealized holding gains and losses on securities available for sale would have the following effects on accumulated other comprehensive income: Gains Losses a. Increase Increase b. Decrease Decrease c. Decrease Increase d. Increase Decrease Option a Option b Option c Option d

Answer 1

Option D Increase Decrease

Adjust a gain by crediting as unrealized gain and record a loss by debiting as unrealized loss in accumulated and other income account

Explanation:

Unrealized holding of gains and losses on securities available for sale may consider as unrealized gain or unrealized loss by considering the current market value (price) of such related securities in the securities market. The unsold securities occurs only on paper and has yet to be recognized by selling the same.

Only some unrealized gains are reported on the income statement and increase your net income, or profit and some unrealized losses are reported on the income statement and decrease your net income, or profit.  So the option D - increase decrease has to be taken as answer for this question.