Two equity securities were purchased by Company XYZ in 1999 for $1,000. The market value of these securities rose to $1,350 by the end of 2000. If these securities were accounted for under SFAS 115 as Trading Securities, which of the following correctly describes their treatment on the balance sheet prior to posting the results of the income statement to the balance sheet? A) The valuation of the “Marketable Securities” account on the assets side of the balance sheet will remain unchanged. B) The valuation of the “Marketable Securities” account on the assets side of the balance sheet will rise by $350. C) The equity of the firm will rise by $350. Your answer: B was correct! ------------ i’m not sure what the q is asking. TS are carried at FMV and the net unrealized holding gain of $350 is on the extended income statement under comprehensive income. what does it have to do with the balance sheet? i suppose the investment in affiliate company account increases by 350 but the Q states prior to posting the results of the i/s to the b/s…
it is available for sale then only it will go under comprehensive income on equity side of B/S. This is trading and hence will be post at FMV.
nevermind. i misunderstood the question.
and i meant to say comprehensive income statement rather than OCI http://en.wikipedia.org/wiki/Comprehensive_income