Jones Company has notes receivable that have a fair value of $950,000 and a carrying amount of $1,250,000. Jones decides on December 31, 2017, to use the fair value option for these recently-acquired receivables. Which of the following entries will be made on December 31, 2017 to record the unrealized holding gain/loss? A. Unrealized Holding Gain or Loss - Equity 300,000

Notes Receivable 300,000

B. Unrealized Holding Gain or Loss-Income. 300,000

Notes Receivable 300,000

C. Notes Receivable 300,000 300,000

Unrealized Holding Gain or Loss-Income 300,000

D. Notes Receivable 300,000 300,000

Unrealized Holding Gain or Loss Equity 300,000

Question

Business

Samir Zuniga

17 April, 04:45

Jones Company has notes receivable that have a fair value of $950,000 and a carrying amount of $1,250,000. Jones decides on December 31, 2017, to use the fair value option for these recently-acquired receivables. Which of the following entries will be made on December 31, 2017 to record the unrealized holding gain/loss? A. Unrealized Holding Gain or Loss - Equity 300,000

Notes Receivable 300,000

B. Unrealized Holding Gain or Loss-Income. 300,000

Notes Receivable 300,000

C. Notes Receivable 300,000 300,000

Unrealized Holding Gain or Loss-Income 300,000

D. Notes Receivable 300,000 300,000

Unrealized Holding Gain or Loss Equity 300,000

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Answers (1)

Know the Answer?

Dalia Carlson · Answer 1

B) Unrealized Holding Gain or Loss-Income. 300,000

Notes Receivable 300,000

Explanation:

December 31, 2017 realized losses:

Dr Unrealized Holding Gain or Loss-Income 300,000 Cr Notes Receivable 300,000

Since the carrying value of the notes receivable was $300,000 higher than their fair market value, it means that the company will lose money.

Since the company is losing money, it should debit the Unrealized Holding Gain or Loss-Income account. Gains are credited and losses are debited.