On August 31, 2011, Stiggins Company purchased the following available-for-sale securities:

On December 31, 2011, Stiggins reclassified its investment in security F from available-for-sale securities to trading securities. What total amount of loss on these securities should be included in Stiggins' income statement for the year ended December 31, 2011?

Question

On August 31, 2011, Stiggins Company purchased the following available-for-sale securities:

On December 31, 2011, Stiggins reclassified its investment in security F from available-for-sale securities to trading securities. What total amount of loss on these securities should be included in Stiggins' income statement for the year ended December 31, 2011?

Quizplus · Accepted Answer

The total amount of loss on these securities should be the sum of the individual unrealized losses on each security at December 31, 2011. Since security F was reclassified from available-for-sale to trading securities, its unrealized loss of $6,000 at August 31, 2011 became a realized loss. The other securities were still classified as available-for-sale at year-end, so their unrealized losses should be included in other comprehensive income. Therefore, the total amount of loss that should be included in Stiggins' income statement for the year ended December 31, 2011, is the realized loss on security F of $6,000 plus the unrealized losses on the other securities, which total $10,000 + $6,000 = $16,000. So the correct option is B.

On August 31, 2011, Stiggins Company Purchased the Following Available-For-Sale