Given the following information about Ultra Inc.’s portfolio of investments: Cos
ID: 2415531 • Letter: G
Question
Given the following information about Ultra Inc.’s portfolio of investments:
Cost
Fair
Value
12/31/04
2005
Purchases
2005
Sales
Fair
Value
12/31/05
Held-to-maturity securities
Security J
$128,000
$130,000
Trading equity securities
Security K
$700,000
$725,000
705,000
Security A
100,000
110,000
$150,000
Available-for-sale equity securities
Security S
400,000
380,000
500,000
Security L
100,000
95,000
102,000
Assume that Security J is a debt security that was purchased at a premium. The premium amortization for 2005 was $3,000. All declines in fair value are considered temporary.
What is the carrying amount of Security K at December 31, 2005?
$705,000
$700,000
$725,000
$710,000
Cost
Fair
Value
12/31/04
2005
Purchases
2005
Sales
Fair
Value
12/31/05
Held-to-maturity securities
Security J
$128,000
$130,000
Trading equity securities
Security K
$700,000
$725,000
705,000
Security A
100,000
110,000
$150,000
Available-for-sale equity securities
Security S
400,000
380,000
500,000
Security L
100,000
95,000
102,000
Explanation / Answer
Carrying amount of the security K at December 31,2005 should be $ 705,000.
Since Security K is a Trading securites it should be always recorded at Fair value .
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