Final answer:
On its 2015 income statement, Trump Company should not report any amount related to the increase in fair value as this $35,000 gain is unrealized. The gain should be reflected in other comprehensive income on the balance sheet.
Step-by-step explanation:
On its December 31, 2014, balance sheet, Trump Company reported its investment in available-for-sale securities, which had cost $600,000, at fair value of $550,000. At December 31, 2015, the fair value of the securities was $585,000. The question is what should Trump report on its 2015 income statement as a result of the increase in fair value of the investments in 2015.
For available-for-sale securities, changes in fair value are not recognized in the income statement until realized. For the period in question, the securities appreciated from a previously reported fair value of $550,000 to a new fair value of $585,000. This increase of $35,000 is an unrealized gain, which should be reported as an increase to other comprehensive income (OCI) in the equity section of the balance sheet, but it does not impact the income statement. Therefore, the correct answer would be: D. Unrealized gain of $35,000