Question

Skywalker Limited purchased shares of Jedi Jewelers during 2018 for​ $124,000. Skywalker elected the fair value option for accounting for this investment. At year end​ 2018, 2019, and​ 2020, this investment had a fair value of​ $120,000, $ 130 comma 000​, and $ 137 comma 000​, respectively. What is the amount of unrealized gain or loss reported on this investment at yearminusend ​2020?

Answer 1

Answer:

$13,000

Explanation:

Consider the movement at year end 2020

2018

Fair value adjustment $4,000 (debit)

Investment in Jedi Jewelers $4,000  ( credit)

2019

Investment in Jedi Jewelers $10,000  ( credit)

Fair value adjustment $10,000 (debit)

2020

Investment in Jedi Jewelers $7,000  ( credit)

Fair value adjustment $7,000 (debit)

Balance in the Fair Value Adjustments :

Balance = ($4,000)+$10,000+7,000

              = $13,000