question archive On December 31, 2009, Fay Company appropriately reported a P100, 000 unrealized loss
On December 31, 2009, Fay Company appropriately reported a P100, 000 unrealized loss
Subject:FinancePrice:2.87 Bought7
On December 31, 2009, Fay Company appropriately reported a P100, 000 unrealized loss. There was no change during 2010 in the composition of Fay’s portfolio of marketable equity securities held as financial asset at fair value through other comprehensive income. Pertinent data are as follows:
|
Security |
Cost |
Market value December 31, 2010 |
|
A |
1, 200,000 |
1, 300, 000 |
|
B |
900, 000 |
500, 000 |
|
C |
1, 600,000 |
1, 500,000 |
|
|
3, 700,000 |
3, 300,000 |
What amount of loss on these securities should be included in the statement of comprehensive income for the year ended December 31, 2110 as component of other comprehensive income?
a. 400, 000
b. 300, 000
c. 100, 000
d. 0
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Answer b
Market value – 12/31/2010 3, 300,000
Market value – 12/31/2009 (3, 700,000 – 100, 000) 3, 600,000
Unrealized loss in 2010 (300, 000)
Unrealized loss – 12/31/2009 (100, 000)
Cumulative unrealized loss – December 31, 2010 (400, 000)
Only the unrealized loss of P300, 000 is shown in the 2010 statement of comprehensive income as component of other comprehensive income. However, the cumulative unrealized loss P400, 000 would appear in the statement of changes in equity.
Actually, if the investment is held as a financial asset at fair value through other comprehensive income, the total or cumulative unrealized gain or loss is always the difference between the market value and the original acquisition cost.
|
Market value – December 231, 2010 |
3, 300,000 |
|
Acquisition cost |
3, 700,000 |
|
Cumulative unrealized loss – 12/31/2010 |
(400, 000) |
