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Test bank for financial accounting tools for business

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Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth EditionS-A E 212(Communication)Kalyn Gise is the daughter of Mark Gise, the founder and president of Carolina Blue SkyEnterprises. She has been working in various departments during school vacations throughouthigh school. She burst into the accounting department excitedly one morning. She said that thestock price of several of the firm's temporary investments are up, and that her father said that thecompany had made over $10,000 because of this jump in stock prices. She asks to see how theincrease is recorded. It is a very busy time in the accounting department, and so her question isdeferred.Required:Prepare a brief note to answer Kalyn question.Ans: N/A, LO: 3, Bloom: C, Difficulty: Easy, Min: 3, AACSB: Communications, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Measurement, AICPAPC: Communications, IMA: FSASolution 212This communication can be informal, but it should contain the key elements of the answer.DearKalyn,Yesterday, you asked to see how we recorded the $10,000 that the company had "earned"because of the jump in the price of some of the stock we hold. Since we were finishingmonth-end closing, we couldn't answer your question right away.An increase in the value of temporary investments is an unrealized gain. An unrealized gainis reported in the income statement because of the likelihood that the securities will be soldat fair value since they are a temporary investment. The gain is recorded by increasing theamount reported as temporary investments and recording an unrealized gain.Again, I'm sorry we couldn't ask you to stay yesterday. Stop by again sometime (any timeexcept month’s end!)(signed)FOR INSTRUCTOR USE ONLYH-64
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