ABC Inc purchased shares of DEF Inc as follows:

June 30 th , 2013 4,000 shares @ $3 per share $12,000
June 30 th , 2014 3,000 shares @ $4 per share $12,000
June 30 th , 2015 3,000 shares @ $6 per share $18,000

The shares are considered to be passive investments. ABC Inc. has a December 31 st , year-end.
The market value of the DEF shares at each year-end was as follows:
December 31 st , 2013 $3.50 per share
December 31 st , 2014 $5.00 per share
December 31 st , 2015 $5.50 per share
On July 1 st , 2015, ABC sold half its shares in DEF Inc. for $6.50 per share.

-Assuming that the shares are designated an FVTOCI investment, the effect on ABC's 2013 financial statements as a result of owning the DEF shares would be:

Question

ABC Inc purchased shares of DEF Inc as follows:

June 30 th , 2013 4,000 shares @ $3 per share $12,000
June 30 th , 2014 3,000 shares @ $4 per share $12,000
June 30 th , 2015 3,000 shares @ $6 per share $18,000

The shares are considered to be passive investments. ABC Inc. has a December 31 st , year-end.
The market value of the DEF shares at each year-end was as follows:
December 31 st , 2013 $3.50 per share
December 31 st , 2014 $5.00 per share
December 31 st , 2015 $5.50 per share
On July 1 st , 2015, ABC sold half its shares in DEF Inc. for $6.50 per share.

-Assuming that the shares are designated an FVTOCI investment, the effect on ABC's 2013 financial statements as a result of owning the DEF shares would be:

Quizplus · Accepted Answer

If the shares are designated as FVTOCI investment, any unrealized gain or loss is recognized in OCI rather than in the income statement. As the fair value of the shares has increased by $2,000, this would result in a $2,000 unrealized holding gain credited to OCI. Therefore, the correct answer is D.

ABC Inc Purchased Shares of DEF Inc as Follows