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

question 47

Multiple Choice

Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale 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, 20X1 is:
$\begin{array}{l|l|l|l|}\hline \text { Available-for-Sale Securities } & \text { Cost } & \begin{array}{l}\text { Fair } \\\text { Value }\end{array} \\\hline \text { December 31, 20X1 } & \$ 250,000 & \$ 241,000 \\\hline \text { December 31, 20X2 } & \$ 340,000 & \$ 350,000 \\\hline \text { December 31, 20X3 } & \$ 410,000 & \$ 415,000\end{array}$

• A) Debit Fair Value Adjustment - Available-for-Sale (LT) $9,000; Credit Unrealized Loss - Equity $9,000.
• B) Debit Unrealized Gain- Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT) $9,000.
• C) Debit Fair Value Adjustment - Available-for-Sale (LT) $9,000; Credit Unrealized Gain - Equity $9,000.
• D) Debit Unrealized Loss - Equity $9,000; Credit Fair Value Adjustment - Available-for-Sale (LT) $9,000.
• E) Debit Unrealized Loss - Income $9,000; Credit Fair Value Adjustment - Available-for-Sale (ST) $9,000.

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Definitions:

Explicit Costs

Costs that involve direct monetary payment by a firm for the resources needed in production, such as wages and materials.

Implicit Costs

The opportunity costs of utilizing resources owned by the company for its operations instead of other purposes.

Accounting Profit

The financial gain calculated by subtracting total explicit costs from total revenues, excluding the consideration of implicit costs or opportunity costs.