Fair value adjustment is used to report the increase

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Fair Value Adjustment is used to report the increase in fair value of the available-for-sale securities. The fair value of the securities is reported in the Investments section of the balance sheet. It should be noted that a combined statement of income and comprehensive income, a statement of comprehensive income, or a statement of stockholders’ equity would report the components of comprehensive income. The note disclosures for the available-for-sale securities include the aggregate fair value, gross unrealized holding gains, and gross un-realized holding losses. Any change in the net unrealized holding gain or loss account should also be disclosed. The disclosure for trading securities includes the change in net unrealized holding gains or losses which was included in earnings. (c) Investment in Norton Industries ($500,000 X 25%) ..... 125,000 Investment Revenue ............................................. 125,000 Cash ($100,000 X 25%) ................................................ 25,000 Investment in Norton Industries .......................... 25,000
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With 25%, Brooks has significant influence and should apply the equity method. No fair value adjustments are recorded under the equity method. PROBLEM 17-12 (a) Balance Sheet Available-for-Sale Securities, at fair value .................... $123,000 (Reported as current or noncurrent based on intent) Unrealized Holding Loss on Securities ........................... $ 4,000 ($127,000 – $123,000) (reported as a separate component of stockholders’ equity as a deduction and identified as accumulated other comprehensive loss) Income Statement No effect (b) Balance Sheet Available-for-Sale Securities, at fair value .................... $94,000
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(Reported as current or noncurrent based on intent) Unrealized Holding Loss on Securities ........................... $42,000 ($136,000 – $94,000) (reported as a separate component of stockholders’ equity as a PROBLEM 17-12 (Continued) deduction and identified as accumulated other comprehensive loss) Income Statement Other Expenses and Losses Loss on Sale of Securities ................... $1,800* *The entry made to recognize the loss on sale is as follows: Cash ................................................................... 38,200 Loss on Sale of Securities ............................. 1,800 Available-for-Sale Securities .............. 40,000
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