Question

Data regarding Rock Corp.’s available-for-sale securities follows: Cost Market Value December 31, year 8 $ 80,000 $ 65,000 December 31, year 9 $ 80,000 $ 90,000 Differences between cost and market values are considered temporary. Rock does not elect the fair value option of accounting for available-for-sale securities. By what amount should Rock increase (credit) its year 9 other comprehensive income?

Answer 1

Answer: $25,000

Explanation:

From the information given in the question, we can see that for the year 8 which ended, the loss of ($80,000 - $65,000) = $15,000 was recognised.

For year 9, while the cost was given as $80,000, it should be noted that the market value was being given as $90,000. Therefore, the amount that will be recognized as the other comprehensive income will be:

= $90,000 - $65,000

= $25,000.