Q11RQ. - Horngren'S Financial And Managerial Accounting

Question

Where on the financial statements is an unrealized holding gain or loss on available-for-sale debt investments reported?

Step-by-Step Solution

Answer

Unrealized holdings gains or losses from available for sale debt are reported in the other comprehensive income.

Step 1: Definition of Comprehensive Income

The sum of net income and all unrealized gains or losses are included in the comprehensive income. Such income reflects the complete view of the income earned by the business.

Step 2: Unrealized Holding Gains or Loss on Available for Sale Debt Investment

Unrealized holding gains and loss on available for sale debt investment are reported in calculating the other comprehensive income. These gains or losses are added or subtracted from the net income to determine the comprehensive income. 

Such gains and losses are reported in the balance sheet under the equity section as accumulated other comprehensive income.