Thanks all for your input.  I agree with Bryris' explanation but I 'm confused about which way to go cuz I remember an example in the book shows the second year change from its year 1 FV to year 2 FV. The example is in F-3 p.8 in the 2008 edition.  should be the last example in the Marketable Securities section. That example has a beginning balance in the valuation account which shows the FV-cost and the activity in the current year being the FV of the current year versus the FV of the prior year. Another piece to the example shows a reversal of a sold security.  As far as the HW question, it's in the supplementary section in F-3 and it's #9 for the 2008 edition.