S&L; Financial buys and sells securities that it typically classifies as availab

Question

S&L; Financial buys and sells securities that it typically classifies as available-for-sale On December 27, 2016. S&L; purchased Coca-Cola common shares for $845,000 and sold the shares on January 3. 2017 for S850.500. At December 31, the shares had a fair value of $844,000. When it purchased the Cuca-Cola shares. S&L; Financial decided to elect the fair value option for this investment. What pretax amounts did S&L; include in its 2016 and 2017 earnings as a result of this investment?

Explanation / Answer

2016

Loss = Fair Value - Book value

Loss = 844000 - 845000

Loss = 1000

At the end Book Value would be adjusted to $ 844000

2017

Gain = Sale Price - Adjusted/Book Value

Gain = 850500 - 844000

Gain = $ 6500

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