Question

On January 1, Butte Company's valuation allowance for trading investments account has a debit balance of $23,200. On December 31, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Butte report on the income statement for the current year?A. an unrealized loss on trading investments, $18,000

B. an unrealized gain on trading investments, $18,000
C. an unrealized gain on trading investments, $5,200
D. an unrealized loss on trading investments, $5,200

Answer 1

B. an unrealized gain on trading investments, $18,000

Step-by-step explanation:

When fair value of trading securities is higher than cost then it means securities generate gain in other words unrealized gain//

So in this question Cost is 80000 and fair value of 9800

So unrealized holding gain = 18000