Question

Sandhill Company's equity securities portfolio which is appropriately included in current assets is as follows: December 31, 2021 Cost Fair Value Unrealized Gain (Loss) Catlett Corp. $220000 $183000 $-37000 Lyman, Inc. 209000 225000 16000 $429000 $408000 $-21000 Ignoring income taxes, what amount should be reported as a charge against income in Sandhill's 2021 income statement if 2021 is Sandhill's first year of operation?

Answer 1

Answer:

($21,000) Unrealized loss

Explanation:

An unrealized loss can be defined as the decreased in cost of an asset which are yet to be sold out due to the fact that one might continue to hold onto such asset after it has declined in price with the expectation that it will gain in value.

$429,000 - $408,000 ($21,000) Unrealized loss

Therefore the amount that should be reported as a charge against income in Sandhill's 2021 income statement if 2021 is Sandhill's first year of operation is ($21,000) which is Unrealized loss because the fair value of the asset realized is lesser than the original cost of the asset.