Carpark Services Began Operations in 20X1 and Maintains Long-Term Investments

question 128

Multiple Choice

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale debt securities.The year-end cost and fair values for its portfolio of these investments follow.The year-end adjusting entry to record the unrealized gain/loss at December 31,20X2 is:

• A)Debit Unrealized Gain - Equity $3,000; Credit Fair Value Adjustment - Available-for-Sale (L
• T)$3,000.
• B)Debit Fair Value Adjustment - Available-for-Sale (L
• T)$6,000; Credit Unrealized Loss - Equity $6,000.
• C)Debit Fair Value Adjustment - Available-for-Sale (L
• T)$3,000; Credit Unrealized Gain - Equity,$3,000.
• D)Debit Fair Value Adjustment - Available-for-Sale (L
• T)$3,000; Credit Unrealized Loss - Equity $3,000.
• E)Debit Fair Value Adjustment - Available-for-Sale (L
• T)$6,000; Credit Unrealized Gain - Equity $6,000.

---

Definitions:

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, reflecting its nature in accounting.

Financial Statement

Reports that provide information about a company's financial condition, performance, and cash flows, including balance sheets, income statements, and more.

Permanent/Temporary

Classification of accounts; permanent accounts are balance sheet accounts that carry their ending balances into the next accounting period, while temporary accounts are closed and zeroed out at the end of each period.

Normal Balance

The side (debit or credit) on which increases are recorded in an account, based on the type of account.