McGinn Company Purchased 10% of RJ Company's Common Stock During

question 54

Multiple Choice

McGinn Company purchased 10% of RJ Company's common stock during 2014 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2014 and a $105,000 fair value at the end of 2015. Which of the following statements is correct if McGinn classifies the investment as a trading security?

• A) The 2014 unrealized loss is $10,000, but is not included in McGinn's 2014 net income.
• B) The 2015 unrealized gain is $15,000, but is not included in McGinn's 2015 net income.
• C)The 2015 unrealized gain is $15,000 and is included in McGinn's 2015 net income.
• D)The 2014 unrealized loss is $10,000 and is reported on McGinn's balance sheet as a component of stockholders' equity and is not reported on the income statement.

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