On January 1, 2013, Everglade Company purchased the following securities and properly accounted for them as securities available for sale: All declines in value are considered temporary. What amount should the Everglade Company report relative to these securities in its 2013 statement of other comprehensive income?

Question

On January 1, 2013, Everglade Company purchased the following securities and properly accounted for them as securities available for sale:  All declines in value are considered temporary. What amount should the Everglade Company report relative to these securities in its 2013 statement of other comprehensive income?

Quizplus · Accepted Answer

The net unrealized gain is calculated by taking the fair value of the securities at the end of the period (in this case, December 31, 2013) minus the cost of the securities. The fair value at the end of the period is $31,000 and the cost is $19,000 ($10,000 + $9,000). Therefore, the net unrealized gain is $12,000 ($31,000 - $19,000). Since all the declines in value are considered temporary, the entire $12,000 net unrealized gain should be reported in other comprehensive income on the balance sheet.

On January 1, 2013, Everglade Company Purchased the Following Securities