Available-for-Sale Securities are considered to be both current assets or non-current assets depending on when an entity sells its stocks. They are similar to trading securities, and are valued at fair value. Appreciation of these stocks are considered to be unrealized gains/losses and are part of Other Comprehensive Income. Gains and losses that result from the sale of available for sale securities are considered to be realized gains/losses and reported on the income statement.
Example 1:
Adequate Disclosure, Inc. purchases available for sale securities from Inadequate Disclosure, Inc. for $95,000. It plans on holding these securities till it can sell for a huge gain. The fair value at the end of the year is $109,000. Record the journal entries.
Example 2:
Adequate Disclosure has the following information pertaining to its financial statements. Construct the State of Comprehensive Income, including the Unrealized Gain from the prior example.
