Final answer:
The $2,000 difference between the purchase price ($10,000) and sale price ($12,000) of AFS securities should be recorded as a gain on the income statement, impacting the net income for the period.
Step-by-step explanation:
When a short-term investment in Available-for-Sale (AFS) securities is purchased for $10,000 and later sold for $12,000, the $2,000 difference should be recorded as a gain on the income statement. This gain reflects an increase in the value of the investment from the time of purchase until the point of sale.
The sale transaction involves debiting cash for $12,000, crediting the original AFS Securities Asset account for the purchase price of $10,000, and recording the remaining $2,000 as a credit to a Gain on Sale of Securities account. This gain impacts the net income for the period in which the securities were sold.