(show notes) At the end of the first year of operations, the total cost of the t
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Question
(show notes)
At the end of the first year of operations, the total cost of the trading securities portfolio is $232,000. Total fair value is $250,000. The financial statements should show Select one: a. an addition to an asset of $18,000 and an unrealized gain of $18,000 in the stockholders' equity section. b. an addition to an asset of $18,000 in the current assets section and a realized gain of $18,000 in “Other revenues and gains.” c. an addition to an asset of $18,000 and a realized gain of $18,000. d. an addition to an asset of $18,000 in the current assets section and an unrealized gain of $18,000 in “Other revenues and gains.”
(5 points) Assume the following sales data for a company:
2014 $1,097,000
2013 838,500
2012 675,300
2011 458,700
If 2011 is the base year, what is the percentage increase in sales from 2011 to 2013?
Select one: a. 82.8% b. 54.7% c. 47.2% d. 100.0%
Explanation / Answer
Cost of the securities =$232,000.
Fair value = $250,000.
Unrealized gain=$250,000 -$232,000 =$18,000.
Trading securities should be valued at fair value and the asset account is adjusted and any unrealized gain is disclosed in the income statement. The nature of the unrealized gains is temporary in nature, hence it is shown as "Other revenue and gains"
Therefore, answer is option d.
Answer for second question:
Sales in base year=$458,700.
Sales in 2013=$838,500.
% increase in sales = Difference in sales/Sales of base year
=(($838,500 -$458,700)/$458,700)*100
=82.8%.
Therefore, answer is option a.
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