Question

At the end of year 1, Rome Inc. held debt securities classified as available-for-sale securities. The securities were carried at market value of $57,320 with a cumulative unrealized loss of $12,350. What was the historical cost of the debt securities available for sale?

Answer 1

Answer:

The historical cost of the debt securities available for sale was $69,670.

Explanation:

Market value of the securities = $57,320

Cumulative unrealized Loss = $12,350

Historical cost of the securities held for sale = Market Value of the Securites + Cummulative unrealized losses

Historical cost of the securities held for sale = $57,320 + $12,350

Historical cost of the securities held for sale = $69,670

Securities Held for sale are recorded at the fairmarket value and its losses are accumulated. By adding cummulative losses of security to Maerket value of security we can calculate historical cost of the security.