3. Suppose Steinway holds the same marketable securities through the end of 2013
ID: 2329942 • Letter: 3
Question
3. Suppose Steinway holds the same marketable securities through the end of 2013 and that they increased in value to $1,883 by the end of 2013. What effect (direction and amount) would the securities have had on Steinway's 2013 pretax income if they were securities available for sale? (1 point) What effect (direction and amount) would the securities have had on Steinway's 2013 pretax income if they were trading securities? (I point) 4. Instead of holding them on December 31, 2013, suppose Steinway sold the securities on December 31, 2013 for $1,883. What effect (direction and amount) would the securities have had on Steinway's 2013 pretax income if they were securities available for sale? (2 point) What effect (direction and amount) would the securities have had on Steinway's 2013 pretax income if they were trading securities? (2 point)Explanation / Answer
3.
(a) The securities would have had NO effect on Steinway’s 2013 pretax income if they were available for sale.
(b) If they were Trading Securities, then the effect will be 1883 - Fair Value. If positive, then increase by the difference amount and vice versa.
4.
(a) The effect will be positive if the difference is positive and vice versa.
1883 - cost of marketable securities available for sale
(b) If they were Trading Securities, then the effect will be 1883 - Fair Value. If positive, then increase by the difference amount and vice versa
[Note : The above question has been answered as per the details given, values can be taken from question 1,2]
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