A company buys debt securities for $2,000 on December 31, year 1. The debt securities are classified as available-for-sale. The company does not elect to use the fair value option for reporting its available-for-sale debt securities. The fair value of the securities increases to $7,000 on December 31, year 2, and to $9,500 on December 31, year 3. On December 31, year 3, the company sells the securities at fair value. Assume the company has a tax rate of 30%. What is the amount of the reclassification adjustment to other comprehensive income on December 31, year 3? A. $ 5,250 debit B. $ 7,500 debit C. $5,250 credit D. $ 7,500 credit

A company buys debt securities for $2,000 on December 31, year 1. The debt securities are classified as available-for-sale. The company does not elect to use the fair value option for reporting its available-for-sale debt securities. The fair value of the securities increases to $7,000 on December 31, year 2, and to $9,500 on December 31, year 3. On December 31, year 3, the company sells the securities at fair value. Assume the company has a tax rate of 30%. What is the amount of the reclassification adjustment to other comprehensive income on December 31, year 3? A. $ 5,250 debit B. $ 7,500 debit C. $5,250 credit D. $ 7,500 credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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