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amount of the reclassification adjustment to other comprehensive income on December 31, year 3? A. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit

amount of the reclassification adjustment to other comprehensive income on December 31, year 3? A. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit

FINANCIAL ACCOUNTING
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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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. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit
Transcribed Image Text: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. $7500 credit B. 7500 Debit C. 5250 credit D. 5250 debit
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