Question

On October 12, 2006, Lowell Corporation invested $600,000 in short-term available-for-sale marketable securities. The market value of this investment was $660,000 at December 31, 2006, but had slipped to $655,000 by December 31, 2007. 27. Refer to the above data. In financial statements prepared on December 31, 2006, Lowell Corporation reports: A) The asset Investments in Marketable Securities at $600,000, and a $60,000 Unrealized Holding Gain included in total stockholders' equity. B) The asset Investments in Marketable Securities at $660,000, and a $60,000 gain recognized in the income statement. C) The asset Investments in Marketable Securities at $600,000 with footnote disclosure of the market value of $660,000. D) The asset Investments in Marketable Securities at $660,000, and a $60,000 Unrealized Holding Gain included in total stockholders' equity.

Answer 1

Answer:

option D

Explanation:

In financial statements In balance sheet short term investment available for sale of securities should be reported on fair value of investment and unrealized gain or loss should be included in stockholder's equity.

so in this question 660,000 should be reported as asset investment in marketable securities and (660000-600000) = 60000 unrealized gain should be reported in stockholder's equity.

The asset Investments in Marketable Securities at $660,000, and a $60,000 Unrealized Holding Gain included in total stockholders' equity