During its first year of operation, Snapper Limited (a public company) acquired three securities as trading investments.Investment A cost $75,000 and had a year-end fair value of $80,000.Investment B cost $42,000 and had a year-end fair value of $26,000.Investment C cost $32,000 and had a year-end fair value of $30,000.What amount should be reported as an unrealized loss in Snapper's statement of income for the first year of operation?
A)$0
B)$13,000
C)$18,000
D)$23,000

Question

Quizplus · Accepted Answer

The unrealized loss is calculated by comparing the cost to the year-end fair value of the investments. Investment B and C have decreased in value, resulting in losses of $16,000 ($42,000 - $26,000) and $2,000 ($32,000 - $30,000) respectively, totaling $18,000. However, Investment A's gain of $5,000 ($80,000 - $75,000) is not considered in calculating unrealized loss. Therefore, the total unrealized loss reported in the income statement is $18,000.

During Its First Year of Operation, Snapper Limited (A Public