Garcia Co. has the following available-for-sale securities outstanding on December 31, 2013 (its first year of operations).

Cost Fair Value

Rossi Corp. Stock $20,000 $19,000

Barker Company Stock 9,500 8,800

Boliva Company Stock 20,000 20,600

$49,500 $48,400

During 2014, Barker Company stock was sold for $9,200, the difference between the $9,200 and the fair value of $8,800 being recorded as a Gain on Sale of Investments. The market price of the stock on December 31, 2014, was: Rossi Corp. stock $19,900; Boliva Company stock $20,500.

Required:

A. What justification is there for valuing available-for-sale securities at fair value and reporting the unrealized gain or loss as part of stockholders' equity rather than net income?

B. How should Garcia Company apply this rule on December 31, 2013? Explain.

C. Did Garcia Company properly account for the sale of the Barker Company stock? Explain.

D. Are there any additional entries necessary for Garcia Company at December 31, 2014, to reflect the facts on the financial statements in accordance with generally accepted accounting principles? Explain.