Question

Base Company purchased 2,000 shares of Jones Company for $10 per share. The investment represents 10% ownership and Base Company holds the investment as an available-for-sale debt investment. The fair value at year end is $8 per share. Assuming no other transactions occurred where would the $2.00 per share difference be reported on the year-end financial statements?

Answer 1

It should be reported as Unrealized holding loss under Other comprehensive income. Other comprehensive income appears after net income in the Income Statement.

Step-by-step explanation:

Unrealized holding loss is a decrease in the fair market value of an asset that the company has on sale but hasn't been sold yet.

Other comprehensive income includes unrealized revenues, expenses, gains and losses.