During 2011 Kim Company purchased 4,000 shares of Peacock, Inc. for $30 per shar

Question

During 2011 Kim Company purchased 4,000 shares of Peacock, Inc. for $30 per share. The investment was classified as a trading security. During the year Kim Company sold 1,000 shares of Peacock, Inc. for $35 per share. At December 31, 2011 the market price of Peacock, Inc.'s stock was $28 per share. Whats is the total amount of gain/(loss) Kim Company will report in its income statement for the year ended December 31, 2011 related to its investment in Peacock, Inc. stock?

a)($8,000) b)$5,000 c)($3,000) d)($1,000) e) Some other amount_________

Explanation / Answer

gain on sale of shares [1000*(35-30)] = 5000

loss on decrease in value of investment [3000*(30-28)] = (6000)

net loss reported in income statement = (1000)

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