Question
A company buys debt securities for $2,000 on December 31, year 1. The debt securities are classified as availableforsale. The company does not elect to
A company buys debt securities for $2,000 on December 31, year 1. The debt securities are classified as availableforsale. The company does not elect to use the fair value option for reporting its availableforsale debt securities. The fair value of the securities increases to $7,000 on December 31, year 2, and to $9,500 on December 31, year 3. On December 31, year 3, the company sells the securities at fair value. Assume the company has a tax rate of 30%. What is the amount of the reclassification adjustment to other comprehensive income on December 31, year 3?
A. $ 5,250 debit
B. $ 7,500 debit
C. $ 5,250 credit
D. $ 7,500 credit
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