Debt and equity investments that are not classified as trading securities or held

Debt and equity investments that are not classified as trading securities or held

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Debt and equity investments that are not classified as trading securities or held-to-maturity securities  are called  available-for-sale securities . Whereas trading securities are short-term, available-for- sale securities may be classified as either short-term or long-term assets based on management's  intention of when to sell the securities. Available-for-sale securities are also valued at fair market  value. Any resulting gain or loss is recorded to an unrealized gain and loss account that is reported  as a separate line item in the stockholders' equity section of the balance sheet. The gains and losses  for available-for-sale securities are not reported on the income statement until the securities are sold. 
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Unformatted text preview: Unlike trading securities that will be sold in the near future, there is a longer time before available-for-sale securities will be sold, and therefore, greater potential exists for changes in the fair market value. For example, assume the Brothers Quartet has available-for-sale securities, whose cost and fair market value are: Valuation of Available-for-Sale Securities Cost Fair Market Value Unrealized Gain (Loss) TLM Bonds $40,000 $38,000 $(2,000) EAK Stocks 50,000 70,000 20,000 MJM Stocks 25,000 22,000 (3,000) Total Available-for-Sale Securities $115,000 $130,000 $15,000...
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