Use the following information on a company's investments in debt securities to answer bellow Questions. The company's accounting year ends December 31.
$\begin{array}{|l|r|r|r|r|r|}
\hline&\text { Date of } &&\text { Fair Value } &\text { Date }&\text { Selling } \
\text { Investment }&\text { Acquisition } & \text { Cost } &12 / 31 / 19&\text { Sold }&\text { Price }\
\hline \text { Colt Company stock } & 9 / 20 / 19 & \$ 38,000 & \$ 37,000 & 2 / 10 / 20 & \$ 42,000 \
\hline \text { Dana Company stock } & 10 / 2 / 19 & 14,000 & 14,200 & 1 / 17 / 20 & 13,000 \
\hline
\end{array}$
-If the above investments are categorized as available-for-sale securities, what amount is reported as gain or loss on securities in 2020 income?

Question

Use the following information on a company's investments in debt securities to answer bellow Questions. The company's accounting year ends December 31.
 $\begin{array}{|l|r|r|r|r|r|}
\hline&\text { Date of } &&\text { Fair Value } &\text { Date }&\text { Selling } \
\text { Investment }&\text { Acquisition } & \text { Cost } &12 / 31 / 19&\text { Sold }&\text { Price }\
\hline \text { Colt Company stock } & 9 / 20 / 19 & \$ 38,000 & \$ 37,000 & 2 / 10 / 20 & \$ 42,000 \
\hline \text { Dana Company stock } & 10 / 2 / 19 & 14,000 & 14,200 & 1 / 17 / 20 & 13,000 \
\hline
\end{array}$
-If the above investments are categorized as available-for-sale securities, what amount is reported as gain or loss on securities in 2020 income?

Quizplus · Accepted Answer

For available-for-sale securities, gains or losses are recognized in income when the securities are sold. The gain or loss is the difference between the selling price and the cost. For Colt Company stock, the gain is $42,000 - $38,000 = $4,000. For Dana Company stock, the loss is $13,000 - $14,000 = -$1,000. The net gain in 2020 is $4,000 - $1,000 = $3,000.

Use the Following Information on a Company's Investments in Debt