Chapter 16, Problem 16.1MC

Deutsch Imports has three securities in its available-for-sale debt investment portfolio Information about these securities is as follows:

	Amortized Cost	Market Value
Security		12/31/Year 1	12/31/Year 2
NCB	$78,000	$ 93,600	$100,000
TRR	$17,000	$120,000	0
Enson	$58,500	$ 53,300	$ 50,700

TRR was sold in Year 2 for $127,400

Which of the following statements is correct?

1. I.          On its 12/31/Year 2 balance sheet. Deutsch should report the NCB debt investment at its fair value of $100,000.
2. II.           On its 12/31/Year 2 balance sheet Deutsch should report an unrealized holding gain on the NCB debt investment of $22,000 in stockholders' equity.
3. III.            On its income statement for the year ending December 31, year 2 Deutsch should report.

an unrealized holding gain on the NCB debt investment of $22,000

1. a. I only is correct
2. b. I and II only are correct
3. c. I and III only are correct
4. d. None of the listed answers is correct