Questions
Homework:practice exam 2
Single choice
Part 1Rhoads purchased common shares of Company A and B for $10,000 and $ 11,000$11,000, respectively on 12/15. Rhoads intends to sell these securities within 30 days. At 12/31, Investments in Company A & B had a fair value of $9,000 and $ 17,000$17,000, respectively. Assuming Rhoads has no significant influence over the investee companies, what is the unrealized gain or loss for these securities and how is it reported? Part 1 A. Unrealized Gain of $ 5,000$5,000, reported as part of Net Income B. Unrealized Loss of $1,000, Unrealized Gain of $ 6,000$6,000, both reported as part of Other Comprehensive Income C. Unrealized Loss of $1,000, Unrealized Gain of $ 6,000$6,000, both reported as part of Net Income D. Unrealized Gain of $ 5,000$5,000, reported as part of Other Comprehensive Income
Options
A.A. Unrealized Gain of $ 5,000 , reported as part of Net Income
B.B. Unrealized Loss of $1,000, Unrealized Gain of $ 6,000 , both reported as part of Other Comprehensive Income
C.C. Unrealized Loss of $1,000, Unrealized Gain of $ 6,000 , both reported as part of Net Income
D.D. Unrealized Gain of $ 5,000 , reported as part of Other Comprehensive Income
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First, restating the scenario: Rhoads purchased common shares of Company A for $10,000 and Company B for $11,000, intending to sell within 30 days. At 12/31, fair values are $9,000 for A and $17,000 for B. There is no significant influence over the investees. We need to determine the unrealized gains or losses and how they are reported.
Option A: 'Unrealized Gain of $5,000, reported as part of Net Income.' This option asserts a single gain of $5,000 and that it is reported in net income. However, when looking at the individual securities, Company A shows a loss (FV 9,000 vs cost......Login to view full explanationLog in for full answers
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