Following is a portion of the investments footnote from Allstate's 2016 10-K. Investment earnings are a crucial component of the financial performance of insurance companies such as Allstate, and investments comprise a large part of Allstate's assets. Allstate accounts for its debt securities as available-for-sale securities.
Required:
a. What amount does Allstate report for available-for-sale debt securities on its balance sheets for 2016 and 2015?
b. What are the net unrealized gains (losses) at year-end 2016 and 2015? How did these unrealized gains (losses) affect the company's reported income in 2016 and 2015?
c. If the company had accounted for these debt securities as trading securities, how would income before income tax have been affected in 2016? Your response should quantify the effect in dollars.
d. What is the difference between realized and unrealized gains and losses? Relating to debt securities, are realized gains and losses treated differently in the income statement than unrealized gains and losses?

Question

Following is a portion of the investments footnote from Allstate's 2016 10-K. Investment earnings are a crucial component of the financial performance of insurance companies such as Allstate, and investments comprise a large part of Allstate's assets. Allstate accounts for its debt securities as available-for-sale securities.
  Required: 
a. What amount does Allstate report for available-for-sale debt securities on its balance sheets for 2016 and 2015?
b. What are the net unrealized gains (losses) at year-end 2016 and 2015? How did these unrealized gains (losses) affect the company's reported income in 2016 and 2015?
c. If the company had accounted for these debt securities as trading securities, how would income before income tax have been affected in 2016? Your response should quantify the effect in dollars.
d. What is the difference between realized and unrealized gains and losses? Relating to debt securities, are realized gains and losses treated differently in the income statement than unrealized gains and losses?

Quizplus · Accepted Answer

The Answer of Following is a portion of the investments footnote from Allstate's 2016 10-K. Investment earnings are a crucial component of the financial performance of insurance companies such as Allstate, and investments comprise a large part of Allstate's assets. Allstate accounts for its debt securities as available-for-sale securities.
  Required: 
a. What amount does Allstate report for available-for-sale debt securities on its balance sheets for 2016 and 2015?
b. What are the net unrealized gains (losses) at year-end 2016 and 2015? How did these unrealized gains (losses) affect the company's reported income in 2016 and 2015?
c. If the company had accounted for these debt securities as trading securities, how would income before income tax have been affected in 2016? Your response should quantify the effect in dollars.
d. What is the difference between realized and unrealized gains and losses? Relating to debt securities, are realized gains and losses treated differently in the income statement than unrealized gains and losses?

Following Is a Portion of the Investments Footnote from Allstate's