7. Receivables and Investments
Available-for-Sale (AFS) Securities
Multiple Choice
Multiple ChoiceChitty Company often has excess cash on hand to invest. Suppose that Chitty purchases 640 shares of Bang Company common stock at a price of $35 per share. Chitty classifies the investment as available-for-sale securities. This purchase occurred on December 9, 2018. As of December 31, the market price of Chitty stock had increased to $41 per share. Chitty's journal entry on December 31, 2018 related to the investment in Bang Company stock would include:
A
A debit to Unrealized Gain on the Income Statement for $3,840
B
A debit to Investments on the Balance Sheet for $3,840
C
A credit to Unrealized Gain in Other Comprehensive Income for $3,840
D
A debit to Cash for $3,840
E
Two of the answers are correct
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