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Unrealized losses for available-for-sale securities

See attached file.

When a company has an unrealized loss/gain from their available-for-sale securities, the balance in the Securities Fair Value adjustment account is supposed to be added or subtracted. Since this account doesn't have a normal balance I don't know when to add or subtract losses or gains or if I'm supposed to subtract at all.

I guess my question is if you have an unrealized loss in to consecutive years do you add both losses in the securities fair value adjustment account?

What about when you have a loss in one year and a gain in another? What is the balance on the securities fair value adjustment account is supposed to look like?

Questions:

Use the following to answer questions 26-27:

On its December 31, 2007 balance sheet, Klugman Company appropriately reported a $10,000 debit balance in its Securities Fair Value Adjustment (Available-for-Sale) account. There was no change during 2008 in the composition of Klugman's portfolio of marketable equity securities held as available-for-sale securities. The following information pertains to that portfolio: (See file for table)

26. What amount of unrealized loss on these securities should be included in Klugman's stockholders' equity section of the balance sheet at December 31, 2008?
A) $30,000.
B) $20,000.
C) $10,000.
D) $0.

27. The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2008 is
A) $30,000.
B) $20,000.
C) $10,000.
D) $0.

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I guess my question is if you have an unrealized loss in to consecutive years do you add both losses in the securities fair value adjustment account?

The securities fair value adjustment account would reflect the difference between the fair market value and the cost as on reporting date. ...

Solution Summary

The solution explains how to determine the amount of unrealized losses for available-for-sale securities

$2.19