At the Beginning of the Year, the Permanent Fund of Rose

question 17

Multiple Choice

At the beginning of the year, the permanent fund of Rose City had an investment portfolio with a historical cost of $300,000 and a fair value of $330,000. There were no purchases or sales of securities during the year. At the end of the year the portfolio had a fair value of $360,000. At year-end, the city s account for this increase in fair value in which of the following ways?

• A) Credit Investment income, $30,000.
• B) Credit Investment income, $60,000.
• C) Credit Fund balance, $30,000.
• D) No entry should be made to recognize an increase in fair value.

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Definitions:

Issued Capital

refers to the total value of a company's shares that have been sold and are held by shareholders.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested into the company.

Investment Elimination Entry

An accounting entry made in the process of consolidating financial statements to remove the effects of intercompany investments and avoid double counting.

Subsidiary Asset

An asset owned by a subsidiary company, which itself is controlled by a parent company through ownership of more than half of its voting stock.