Lyrical Company purchased debt securities for $500,000 and classified them as trading securities on September 15,2019.On December 31,2019,the current fair value of the securities was $481,000.How should the investment be reported within the 2019 financial statements?

A) The debt investment in trading securities would be reported in the balance sheet at its $481,000 fair value.
B) The debt investment in trading securities would be reported in the balance sheet at its $500,000 cost.
C) A realized holding loss on the debt trading securities would be reported on the income statement.
D) The investment in debt trading securities would be reported in the balance sheet at its $481,000 fair value and a realized holding loss on the debt trading securities would be reported on the income statement.

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Quincy Woods · Accepted Answer

Final Answer : A, Explanation :  CTrading securities are reported at fair value on the balance sheet, and any unrealized gains or losses are recognized in the income statement. Therefore, the investment should be reported at its current fair value of $481,000 on the balance sheet, and the $19,000 decrease in value should be recognized as a loss on the income statement.

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