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Roman55 [17]
3 years ago
10

A company failed to record unrealized gains of $26 million on its debt investments classified as trading securities. Its tax rat

e is 35%. As a result of this error, total shareholders' equity would be (Round million answer to 2 decimal places.):
Business
1 answer:
Naya [18.7K]3 years ago
3 0

Answer: Total shareholders' equity = $16.90 million

Explanation:

Unrealized gains or losses of  trading securities investment will be recorded in retained earnings.

Unrealized gains (net of taxes) will increase the balance of retained earnings, which is a part of shareholders' equity. If unrealized gains are not recorded then the retained earnings is understated.

\thereforeUnrealized gains (net of taxes) = Unrealized gains - Taxes

= $26 million - 35% of $26 million

= $26 million - $9.10 million

= $16.90 million

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