Rye Company Purchased 15% of Lena Company's Common Stock During

Multiple Choice

Rye Company purchased 15% of Lena Company's common stock during 20X2 for $150,000. The 15% investment in Lena had a $160,000 fair value at the end of 20X2 and a $140,000 fair value at the end of 20X3.
- Which of the following statements is correct if Rye classifies the investment as a trading security?

A) The 20X2 unrealized gain is $10,000 and is included in Rye's 20X2 net earnings.
B) The 20X3 unrealized loss is $20,000, but is not included in Rye's 20X3 net earnings.
C) The 20X3 unrealized loss is $10,000 and is included in Rye's 20X1 net earnings.
D) The 20X2 unrealized gain is $10,000 and is reported on Rye's statement of financial position as a component of stockholders' equity and is not reported within the statement of earnings.