question archive On January 1, 2010, Caraga Company purchased equity securities to be held as ”at fir value through other comprehensive income
On January 1, 2010, Caraga Company purchased equity securities to be held as ”at fir value through other comprehensive income
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On January 1, 2010, Caraga Company purchased equity securities to be held as ”at fir value through other comprehensive income.” The cost and market value of the securities were:
Cost Market – 12/31/2010 Market – 12/31/2011
|
Security R |
3,000,000 |
3,200,000 |
- |
|
Security S |
4,000,000 |
3,500,000 |
3,700,000 |
|
Security T |
5,000,000 |
4,600,000 |
4,700,000 |
On January 31, 2011, Caraga Company sold Security R for P3, 500,000.
What unrealized gain or loss on the remaining financial asset should be in the 2011 statement of comprehensive income as component of other comprehensive income?
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a. 600, 000 gain b. 600, 000 loss c. 300, 000 gain d. 300, 000 loss |
|
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Answer c |
|
|
Fair value of S and T – December 31, 2011 |
8, 400,000 |
|
Fair value of S and T – December 31, 2010 |
8, 100,000 |
|
Unrealized gain in 2011 |
300,000 |
|
Unrealized loss on S and T – December 31, 2010 (9, 000,000-8, 100,000) |
(900, 000) |
|
Cumulative unrealized loss – December 31, 2011 |
(600, 000) |
|
Total fair value – December 31, 2011 |
8, 400,000 |
|
Total cost of S and T (4, 000,000+5, 000,000) |
9, 000,000 |
|
Cumulative unrealized loss – December 31, 2011 |
(600, 000) |
The unrealized gain of P300, 000 is shown in the 2011 statement of comprehensive income as component of other comprehensive income.
However, the cumulative unrealized loss of P600, 000 would appear in the statement of changes in equity.
