Ask Question
BusinessBusiness
24 November, 22:39

On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. GigaTech has 100,000 shares currently outstanding. This is the company's first and only stock investment. On October 31, which is Potter's year-end, the stock had a fair value of $20,000. Potter should record a:

a. Debit to Unrealized Loss-Income for $4,000.

b. Credit to Unrealized Gain-Income for $4,000.

c. Credit to Investment Revenue for $4,000.

d. Debit to Unrealized Gain-Equity for $4,000.

e. Credit to Fair Value Adjustment-Stock for $4,000.

+1
Answers (2)
  1. 25 November, 01:17
    0
    correct option is b. Credit to Unrealized Gain-Income for $4,000.

    Explanation:

    given data

    purchased = 2,000 shares

    GigaTech stock = $16,000.

    currently outstanding = 100,000

    fair value = $20,000

    solution

    as we know Fair Value of the stock is $20,000 and Book Value of stock is $16,000 so here

    Unrealised is Gain Income that is = fair value - Book Value ... 1

    Unrealised is Gain Income = $20,000 - $16,000

    Unrealised is Gain Income = $4,000

    so correct option is b. Credit to Unrealized Gain-Income for $4,000.
  2. 25 November, 01:57
    0
    Option (b) is correct.

    Explanation:

    Unrealized Gain (Income):

    = Fair Value of the stock - Book Value of stock

    = $20,000 - $16,000

    = $4,000

    Therefore, the journal entry is as follows:

    October 31,

    Investment - Available for sale securities A/c Dr. $4,000

    To Unrealized Gain-Income $4,000

    (To record the unrealized income)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. GigaTech has 100,000 shares currently outstanding. This is the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
A firm has hired you as a consultant. This firm is perfectly competitive and has no control over price. This firm is selling 10,000 units at a price of $2. Total costs are $30,000. Total variable costs are $25,000.
Answers (1)
In the text exhibit on kotter's eight step plan for implementing change, which of kotter's eight steps to overcome change problems align with lewin's unfreezing stage?
Answers (1)
Balloon manufacturer is trying to grow its sales by better addressing the needs of its customers. besides party stores, the company doesn't really know who purchases balloons from it. what should the company do to understand its customers better?
Answers (1)
What is the purpise of a Appraisal Form?
Answers (1)
Preferred stock differs from common stock in that A) preferred stock usually has a maturity date. B) preferred stock investors have a higher required return than common stock investors. C) preferred stock dividends are fixed.
Answers (1)
New Questions in Business
Many people have argued that an income tax should be "marriage neutral," that is, two people should pay the same total tax whether they are married or they are single.
Answers (1)
Which company developed the first commercially successful computer? a. ibm b. apple c. amazon d. microsoft
Answers (1)
One of the best networking traits you can develop is
Answers (1)
The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000.
Answers (1)
Which of these is an example of a tax on consumption?
Answers (1)
Home » Business » On July 31, Potter Co. purchased 2,000 shares of GigaTech stock for $16,000. GigaTech has 100,000 shares currently outstanding. This is the company's first and only stock investment.
Sign Up Forgot Password?