Dicker Furriers purchased 1,600 shares of Loose Corporation stock on January 10,

Question

Dicker Furriers purchased 1,600 shares of Loose Corporation stock on January 10, 2015, for $350 per share and classified the investment as securities available for sale. Loose's market value was $200 per share on December 31, 2015, and the decline in value was viewed as temporary. As of December 31, 2016, Dicker still owned the Loose stock whose market value had declined to $120 per share. The decline is due to a reason that's judged to be other than temporary. Dicker's December 31, 2016, balance sheet and the 2016 income statement would show the following: Investment in Loose Stock Income statement loss on investments

a. 192,000 368,000

b. 192,000 128,000

c. 320,000 0

d. 560,000 368,000

Option d

Option a

Option c

Option b

Explanation / Answer

The Purchase Price of 1600 shares of Loose Corporation on January 10, 2105 = 1600*350 = $ 560,000

The above investments are classified as securities available for sale.

Market value of Loose shares as at December 31, 2015 = $ 200 per share and the decline in value was viewed as temporary.

Market value of Loose shares as at December 31, 2016 = $ 120 per share and the decline is due to a reason that judged to be other than temporary.

The above value per share $ 120 not required to be considered because the fall is not temporary and value per share considered at $ 200.

There is not required to account loss in income statement because of the investments not sold and valued at $ 320,000 (1600 shares @ 200 per share)

Therefore, Dicker’s December 31, 2016 Balance sheet and 2016 income statement show the following: $ 320,000 and 0

Therefore the Answer is option “c”

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