Question

An unrealized holding gain on a company's available-for-sale securities should be reflected in the current financial statements as

A. a current gain resulting from holding securities.
B. a note or parenthetical disclosure only.
C. other comprehensive income and included in the equity section of the balance sheet.
D. a direct increase to retained earnings.

Answer 1

An unrealized holding gain on a company's available-for-sale securities should be reflected in the current financial statements. The correct answer is option C.

Step-by-step explanation:

An unrealized holding gain on a company's available-for-sale securities should be reflected in the current financial statements as other comprehensive income and included in the equity section of the balance sheet. This means that the gain is not recognized as a current gain resulting from holding securities.

Is it a direct increase to retained earnings. Instead, it is reported as other comprehensive income, which is a separate line item in the equity section of the balance sheet. This treatment reflects the fact that the gain is not yet realized because the securities have not been sold.

It is important to note that the gain is still reflected in the company's overall financial position, but it is not recognized as an immediate increase to current income or retained earnings.