Question

The account Unrealized Gain (Loss) on Available-for-Sale Investments should be included on the a.statement of retained earnings b.balance sheet as an adjustment to stockholders' equity c.income statement as other revenue (expense) d.balance sheet as an adjustment to the asset account

Answer 1

Answer: b.balance sheet as an adjustment to stockholders' equity

Explanation:

Available-for-Sale Investments are investments by the company into other companies by means of owning their bonds or stocks. These bonds or stock are made available for selling and as such the company will not hold them to maturity.

For these types of instruments, the company will record the Unrealized Gains (losses) in Other Comprehensive Income. This is a part of the Equity Section of the balance sheet.

At the end of the period, the Unrealized Gains (losses) resulting from the Available for Sale Securities do not go to the income statement but rather are put into the Accumulated Other Comprehensive Income distinction in the Equity section of the balance sheet. You can find it right below the Retained Earnings line.

Answer 2

Answer:

b.balance sheet as an adjustment to stockholders' equity

Explanation:

Unrealised gain or loss is also called paper gain or loss. This is because an assets value appreciates or depreciates it is not recognised as an actual gain or loss till it is sold.

These items are recorded on accumulated other comprehensive income in the owner's section of the balance sheet.

However when the assets are to be sold in the short run it is called trading securities and are recorded on the income statement when they are sold