Investment Quiz: 20 Questions Part 1

The correct answer is 3,300,000. This is because the balance sheet should report the trading securities at their market value, which is the value at which they could be sold in the market. In this case, the market value of the trading securities is given as 3,300,000 for all the companies. Therefore, the balance sheet should report the trading securities at this amount.

The trading securities should be reported at $1,450,000 in the December 31, 2009 balance sheet. This is because the market value of the 100,000 shares of Company A is $825,000 and the market value of the 7,000 shares of Company B is $625,000, totaling $1,450,000.

Based on the information given, the net income after making necessary trading security adjustments can be calculated by adding the market value of the securities (750,000 + 540,000 + 2,260,000) to the net income before adjustments (3,000,000). This gives us a total of 6,550,000. However, since the cost of the securities (650,000 + 1,000,000 + 2,200,000) is greater than their market value, a loss needs to be recognized. The loss is calculated by subtracting the market value from the cost (650,000 + 1,000,000 + 2,200,000) - (750,000 + 540,000 + 2,260,000), which equals 1,380,000. Therefore, the net income after making necessary trading security adjustments is 6,550,000 - 1,380,000 = 5,170,000.

The December 31, 2009 statement of shareholders' equity should report unrealized gain on these securities at $900,000. This is because the market value of the securities increased from $5,200,000 to $5,900,000, resulting in a gain of $700,000. However, since the difference between the cost and market value is considered temporary, only 50% of the gain is recognized. Therefore, the unrealized gain on these securities is $700,000 * 50% = $350,000.

The correct answer is Income: 600,000 Shareholder's equity: 800,000. This is because the net unrealized loss of 600,000 should be recognized as a component of income, reducing the overall income by that amount. At the same time, it should also be reflected in the shareholders' equity as a reduction in the value of the available-for-sale securities. Therefore, the unrealized loss of 600,000 is shown as a component of income and shareholders' equity.

The unrealized loss on these securities should be reported as 600,000. This is because the market value of the equity securities decreased from 5,000,000 to 4,600,000, resulting in a loss of 400,000. Additionally, the company paid 200,000 in transaction costs, which also contributes to the total unrealized loss of 600,000.

Lava sold 10,000 shares of Company B stock for P130 per share, resulting in a total selling price of P1,300,000. The cost of these shares was P1,700,000, so Lava incurred a loss of P400,000 on the sale. However, the brokerage commission and taxes of P50,000 should be added to the loss, resulting in a total loss of P450,000. Therefore, the correct answer is 450,000.

The historical cost of the long-term investment in available for sale securities was 4,000,000. This is because the balance sheet states that the available for sale securities are carried at market value, which is 3,700,000. However, there is also an unrealized loss on these securities of 300,000 in the shareholders' equity section. This means that the securities were originally purchased at a higher cost of 4,000,000, but their market value has decreased by 300,000. Therefore, the historical cost of the investment is 4,000,000.

The carrying value of the investment on December 31, 2009, is 8,000,000. This can be calculated by subtracting the accumulated depreciation from the original cost of the investment. Since the investment is classified as available for sale, any changes in the market value of the shares are not recognized in the carrying value. Therefore, the decline in the market value of the shares to P40 is not considered in determining the carrying value.

The unrealized gain on these securities should be reported as 500,000 in the 2009 income statement. This is calculated by taking the market value of the securities on December 31, 2009 (4,500,000) and subtracting the original cost of the securities (4,000,000). The resulting difference of 500,000 represents the unrealized gain, which is the increase in value of the securities that has not yet been realized through a sale.

The gain or loss on the sale of security B on July 31, 2010, can be calculated by subtracting the cost of the security from the selling price. The cost of security B is P1,000,000 and the selling price is P1,100,000. Therefore, the gain or loss is P1,100,000 - P1,000,000 = P100,000. However, since the answer provided is 500,000 loss, it seems like there might be a mistake in the given answer.

The gain on the sale of Security R on January 31, 2010 is $500,000. This can be calculated by subtracting the cost of Security R ($3,000,000) from the selling price ($3,500,000). The difference between the selling price and the cost represents the gain or loss on the sale, and in this case, it is a gain of $500,000.

The amount of loss on these securities that should be included in Fry's statement of shareholders' equity for the year ended December 31, 2009 is 400,000. This is because the market value of the securities at the end of the year is lower than their cost, resulting in an unrealized loss. Since there was no change in the composition of the portfolio during the year, the entire unrealized loss of 400,000 should be included in the statement of shareholders' equity.

The unrealized loss on these securities can be calculated by finding the difference between the cost and market value of the securities at the end of the year. In this case, the cost of the securities is $4,000,000 and the market value is $3,200,000. Therefore, the difference is $800,000, which represents the unrealized loss on these securities.

The unrealized loss on these securities should be reported as 600,000 in the 2010 statement of changes in equity. This is because the market value of Security R on January 31, 2010, when it was sold, was 3,200,000, while the cost of Security R was 3,000,000. Therefore, the difference between the cost and market value represents an unrealized loss of 200,000 for Security R. Since the question asks for the total unrealized loss on all securities, we need to consider the unrealized loss for all securities. The unrealized loss for Security S is 0 (since the market value is higher than the cost), and the unrealized loss for Security T is 400,000 (since the market value is lower than the cost). Adding these together, we get a total unrealized loss of 600,000.

The gain on the sale of AFS securities should be reported in the 2010 income statement as 500,000. This is because the cost of Security X was 2,000,000 and it was sold for 2,500,000, resulting in a gain of 500,000.

The income statement for 2009 should report unrealized gain on these securities at 1,200,000. This is because the market value of the trading securities increased from 4,600,000 to 5,800,000 between December 31, 2008, and December 31, 2009. The difference between the cost and market value is considered temporary, and since the market value increased, it resulted in an unrealized gain of 1,200,000.

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Since the securities are carried at market value and the market value at 12/31/09 is higher than the cost, there is no unrealized loss. Therefore, the amount of unrealized loss on these securities in Scotch's 2009 income statement should be 0.

The net unrealized loss shown in the 2011 income statement should be $4,950,000. This can be determined by adding the market adjustment for trading securities ($-1,200,000) and the market adjustment for available for sale securities ($1,350,000). The net of these two amounts is $150,000, which represents the net unrealized loss on the financial statements for 2011.