As of 12/31/17, XYZ Inc. had Available-for-Sale debt investments with a fair value of $522,000, an amortized cost of $535,000, and a credit balance in the Fair Value Adjustment - Available for Sale Debt Investments account of $7,500. What is the amount of gain or loss reported by XYZ related to these available-for-sale debt investments and how should it be reported?
A) Unrealized Loss of $6,500 reported as part of Other Comprehensive Income.
B) Unrealized Loss of $20,500, reported as part of Net Income.
C) Unrealized Loss of $20,500, reported as part of Other Comprehensive Income.
D) Unrealized Loss of $6,500, reported as part of Net Income.
Answer: A
Explanation: A) Unrealized losses on Available-for-Sale Debt investments are always reported as part of Other Comprehensive Income. The Unrealized loss is calculated as: $522,000 - $535,000 = $(13,000) desired credit balance in the Fair Value Adjustment account. The Fair Value Adjustment account must be credited for $6,500 in order to reach the desired $13,500 credit balance ($13,000 - $7,500), resulting an Unrealized Loss of $6,500.
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