Rye Company purchased 15% of Lena Company's common stock during 2010 for $150,000.The 15% investment in Lena had a $160,000 fair value at the end of 2010 and a $140,000 fair value at the end of 2011.Which of the following statements is correct if Rye classifies the investment as an available-for-sale security and sold it at the beginning of 2012 for $148,000?

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Quizplus · Accepted Answer

The 2012 realized loss is $2,000 and is included within Ryes 2012 income statement. The loss is the difference between the selling price ($148,000) and the initial cost ($150,000), when the investment is an available-for-sale security.

Rye Company Purchased 15% of Lena Company's Common Stock During