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FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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McGinn Company purchased 10% of RJ Company's common stock during 2019
for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of
2019 and a $105,000 fair value at the end of 2020.
Which of the following statements is correct?
The 2019 unrealized loss is $10,000, but is not included in McGinn's 2019 net
income.
The 2020-unrealized gain is $5,000, and is included in McGinn's 2020 net income.
O The 2019 unrealized loss is $10,000 and is reported on McGinn's balance sheet as a
component of stockholders' equity.
O The 2020 unrealized gain is $15,000 and is included in McGinn's 2020 net income.
Transcribed Image Text:McGinn Company purchased 10% of RJ Company's common stock during 2019 for $100,000. The 10% investment in RJ had a $90,000 fair value at the end of 2019 and a $105,000 fair value at the end of 2020. Which of the following statements is correct? The 2019 unrealized loss is $10,000, but is not included in McGinn's 2019 net income. The 2020-unrealized gain is $5,000, and is included in McGinn's 2020 net income. O The 2019 unrealized loss is $10,000 and is reported on McGinn's balance sheet as a component of stockholders' equity. O The 2020 unrealized gain is $15,000 and is included in McGinn's 2020 net income.
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