Question

Boulter, Inc. began business on January 1, 2018. At the end of December 2018, Boulter had the following investments in debt securities: Trading Available for Sale Cost $ 60,000 $ 110,000 Fair value 54,000 107,500 All declines in value are deemed to be temporary in nature. How should the corresponding losses be reflected in the financial statements at December 31, 2018? Income Statement Accumulated Other Comprehensive Income in Shareholders' Equity a. $ 8,500 $ 0 b. $ 0 $ 8,500 c. $ 6,000 $ 2,500 d. $ 2,500 $ 6,000

Answer 1

Answer:

C) $6,000 - $2,500

Explanation:

                                 Trading      Available for Sale  as of December 31, 2018

Cost                         $60,000     $110,000

Fair value                 $54,000     $107,500

Income statements includes unrealized holding loss on trading securities = $60,000 - $54,000 = $6,000

Accumulated Other Comprehensive Income in Shareholders' Equity includes unrealized holding loss on securities available for sale = $110,000 - $107,500 = $2,500