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

question 39

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, 20X2 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) $19,000; Credit Unrealized Loss - Equity $9,000; Credit Unrealized Gain - Equity, $10,000.
• B) Debit Fair Value Adjustment - Available-for-Sale (LT) $10,000; Credit Unrealized Loss - Equity $10,000.
• C) Debit Fair Value Adjustment - Available-for-Sale (LT) $10,000; Credit Unrealized Gain - Equity, $10,000.
• D) Debit Fair Value Adjustment - Available-for-Sale (LT) $19,000; Credit Unrealized Gain - Equity $19,000.
• E) Debit Unrealized Gain - Equity $10,000; Credit Fair Value Adjustment - Available-for-Sale (LT) $10,000.

---

Definitions:

Consolidated Statement

Financial statements that aggregate the assets, liabilities, and operations of a parent company and its subsidiaries.

Equity Earnings

The portion of an investee's profits or losses that is attributed to the investor based on their ownership percentage.

Goodwill Impairment

A write-down of the goodwill account on a company's balance sheet if the fair value of a business unit falls below its carrying value.

Consolidated Shareholders' Equity

The total equity in a company, combining the equity holdings across all subsidiaries and the parent company.