On March 25th, 2018 Phillips Corporation purchased bonds of Atlas Corporation fo

Question

On March 25th, 2018 Phillips Corporation purchased bonds of Atlas Corporation for $132 million and classified the securities as trading securities. On December 31st, 2018 these bonds were valued at $150 million. Four months later, on April 3rd, 2019 Phillips Corporation sold these bonds for $140 million.

As part of the multi-step approach to record the 2019 transaction, Phillips Corporation should first update the fair value adjustment by recording:

Multiple Choice

An unrealized holding gain of $28 million in 2019.

A unrealized holding loss of $10 million in 2019.

An unrealized holding gain of $8 million in 2019.

A gain of $8 million in 2019.

Explanation / Answer

( C ) An unrealized holding gain of $8 million in 2019.

Phillips Corporation should first update the fair value adjustment by recording an unrealized holding gain of $8 million in 2019

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