QUESTION:

A company has a portfolio of investment securities that includes a stock that was purchased for $1,000. At the end of the reporting period, the market price of the stock has increased to $1,500. What would be the journal entry to record the increase in value?

Answer: The journal entry would be: Investment securities (asset) - $ 500 Unrealized gain on investment securities (income) - $500

To record the increase in value of the investment security, we need to debit the unrealized gain on investment securities account for the difference between the fair market value and the original cost of the stock, and credit the investment securities account for the fair market value of the stock. The journal entry would be:

Debit unrealized gain on investment securities (income) for $500

Credit investment securities (asset) for $500

Therefore, the correct journal entry to record the increase in value of the investment security would be:

Investment securities (asset) - $500

Unrealized gain on investment securities (income) - $500