Question 1 2016 Jingle Bells Corp, purchased 2.000 shares of Winter Wonderland W

Question

Question 1 2016 Jingle Bells Corp, purchased 2.000 shares of Winter Wonderland Wholesale for On March 1, $45 per share.Jingle Bells Corp. classifies the investment as available-for-sale. On December 31, 2016 the shares of Winter Wonderland Wholesale had a current market value of $40 per share. What amount of realized gain or loss would Jingle Bells Corp. report on its 2017 income statement if Jingle Bells Corp. sells the 2,000 shares of Winter Wonderland Wholesale on July 1, 2017 for $42 per share? $6,000 gain $10,000 loss $4,000 loss $6,000 loss $4,000 gain

Explanation / Answer

Realized gain or loss to be reported on 2017 income statement will be calculated as follows:

Realized loss = Cost of 2000 shares - Selling price of 2000 shares = (2000 x $45) - (2000 x $42) = $6,000

Therefore, $6,000 loss will be reported on 2017 income statement.

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