(Show notes) 10 points) At December 31, 2015, the trading securities for Trade,

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10 points) At December 31, 2015, the trading securities for Trade, Inc. are as follows:

Cost

Fair Value 12/31/14

$85,500

$98,000

146,500

140,000

28,500

26,000

Saddle should report the following amount related to the securities in its 2014 income statement:

Select one:

Select one:

a. $9,000 unrealized loss.

b. $3,500 realized gain.

c. $12,500 gain.

d. $3,500 unrealized gain.

(10 points) Tempest Co. purchased 50, 9% Urich Company bonds for $45,000 cash. Interest is payable semiannually on July 1 and January 1. If 24 of the securities are sold on July 1 for $64,000, the entry would include a credit to Gain on Sale of Debt Investments for

Select one:

a. $42,092

b. $42,400

c. $42,589

Security

Cost

Fair Value 12/31/14

Explanation / Answer

Solution-

a

since fair value is greater than cost value

  

d. $3,500 unrealized gain

(b)

the answer is b. $42,400.

proportionate cost-sales value

(45000/50*24-64000)

=42,400

Security Cost Fair Value 12/31/14 A $85,500 $98,000 B 146,500 140,000 C 28,500 26,000 $260,500 $264,000 $3,500

since fair value is greater than cost value

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