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 2014 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 2014 financial statements as a result of owning the DEF shares would be:

Quizplus · Accepted Answer

When shares are designated as FVTOCI investments, any unrealized gains or losses are recognized in Other Comprehensive Income (OCI) instead of the income statement. In this case, the fair value of the DEF shares has increased from $80,000 to $89,000, resulting in a $9,000 unrealized holding gain. Since this is recognized in OCI, it has no impact on the income statement, and the answer is D.

ABC Inc Purchased Shares of DEF Inc as Follows