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Value and earnings for available-for-sale and trading securities

Presented below are three unrelated situations involving equity securities:

Situation 1:
An equity security, whose market value is currently less than cost, is classified as available-for-sale but is to be reclassified as trading.

Situation 2:
A noncurrent portfolio with an aggregate market value in excess of cost included one particular security whose market value has declined to be less than one-half of the original cost. The decline in value is considered to be other than temporary.

Situation 3:
The portfolio of trading securities has a cost in excess of fair value of $13,500. The available-for-sale portfolio has a fair value in excess of cost of $28,600.

Instructions:

What is the effect upon carrying value and earnings for each of the situations above?

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ANSWERS

Situation 1
The unrealized loss will decrease the carrying value of the AFS and hence the amount transferred to TS. However it will decrease the ...

Solution Summary

The solution examines the value and earnings for available-for-sale and trading securities. The effect upon carrying value and earnings for each of the situation is determined.

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