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Harvard Co. purchased a bond on December 1 of the current year for $30,000 and classified the investment as trading. The market value of the investment at year-end is $36,000. What value will be reported in net income for the adjustment?

A. $ 36, 000
B. $( 6, 000 )
C. $ 6, 000
D. $ 30, 000

User Vexter
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1 Answer

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Final answer:

The value to be reported in net income for the adjustment would be the unrealized gain, which is $6,000, representing the increase in the market value of the bond from the purchase price to the year-end valuation.

Step-by-step explanation:

The subject of the question involves the reporting of investment values for financial securities in Accounting. Specifically, it pertains to securities that are classified as trading securities. When a company purchases an investment with the intention of selling it in the near term, it is classified as a trading security. The changes in fair value of trading securities are reported in the net income for the period in which the change occurs.

In this scenario, Harvard Co. purchased a bond for $30,000 and at year-end, the market value of that investment had risen to $36,000. The adjustment to net income would be the unrealized gain, which is the difference between the market value at year-end and the cost at the time of purchase. Thus, the value to be reported in net income would be $6,000 (option C).

User SSR
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