At the beginning of the year, company A purchased 10,000 shares of company B for $20 per share. During the year, company B paid a $2,000 cash dividend to company A. At the end of the year, B’s stock was selling for $22 per share. What amount should A recognize in its year-end income statement if the investment is treated as an available-for-sale security and what amount should be recognized in the income statement if the investment is treated as a trading security?
Available-for-sale Trading security A) $2,000 $20,000 B) $2,000 $22,000 C) $0 $22,000
Answer is B
I don’t get the second part. ($2,000 dividend + $20,000 unrealized gain). I don’t get why the unrealized gain is 20,000. Shouldn’t it be 2,000 which is what I was expecting?