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