Please explain

Question # 1107 | Blueprint Area: 2 Ei : Financial Assets at Fair Value Related Chapter: FAR-19 B : Available-for-Sale (AFS) Securities Lee Corp. reported the following marketable debt security on its December 31 previous year balance sheet, classified as an available-for-sale debt security: Neu Corp. Bond, at cost $100,000 Market adjustment to reflect decline in fair value {20,000)_ Balance S$ 80,000 On December 31 of the current year, the fair value of Lee's investment in the Neu Corp. stock was $85,000. Assuming that no credit losses are expected, as a result of the current year increase in the debt security's fair value, Lee's current year income statement should report A An unrealized gain of $5,000 B Arealized gain of $5,000 No gain or loss The correct answer is (D). On 12/31 of the previous year, the required balance of the Market Adjustment--AFS account was a $20,000 credit ($100,000 - $80,000). On 12/31 of the current year, the required balance of the Market Adjustment--AFS account is a $15,000 credit ($100,000 - $85,000). Therefore, in the current year, the required balance of the Market AdjustmentAFS account decreased by $5,000. Changes in the Market Adjustment account related to the available- for-sale category are included in other comprehensive income. Lee does not recognize any gain or loss from a change in the Market Adjustment--AFS account on its income statement