A company invests $400,000 in equity securities on April 30, 2016, and classifie
ID: 2548894 • Letter: A
Question
A company invests $400,000 in equity securities on April 30, 2016, and classifies them as available-for-sale securities. At December 31, 2016, the company's year-end, the securities have a fair value of $410,000. On February 1, 2017, the company sells the securities for $396,000.
Which statement is true regarding how is this information reported in the company's financial statements?
A) The company's 2016 balance sheet reports the securities at $410,000 and a loss of $4,000 is reported in 2017 other comprehensive income.
B) The company's 2016 balance sheet reports the securities at $400,000 and a loss of $4,000 is reported on the 2017 income statement.
C) The company's 2016 balance sheet reports the securites at $410,000 and a gain of $10,000 is reported in 2016 other comprehensive income.
D) The company's 2016 balance sheet reports the securites at $400,000 and no gain or loss appears in the 2016 financial statements.
Explanation / Answer
Securities available for sale will report at market value in their balance sheets.. so answer is:
C) The company's 2016 balance sheet reports the securites at $410,000 and a gain of $10,000 is reported in 2016 other comprehensive income.
Market value as at December 31, 2016 $ 410,000 Less: Cost of security $ (400,000) Gain $ 10,000Related Questions
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