On its December 31, 2017 balance sheet, Crane Company appropriately reported a $

Question

On its December 31, 2017 balance sheet, Crane Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2018 in the composition of Crane’s portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio:

X

$215000

Y

101000

Z

What amount of unrealized loss on these debt securities should be included in Crane's stockholders' equity section of the balance sheet at December 31, 2018?

Security Cost Fair value at 12/31/18

X

$163000

$215000

Y

122000

101000

Z

208000 169000 $493000 $485000

Explanation / Answer

The amount of unrealized loss on securities is Nil as we should consider portfolio’s overall cost and market value and not on individual stock basis

As per accounting practices we should value porfolio at matket value or cost whichever is lower.

In the above mentioned case market value is more than cost so we should not recognise any unrealized loss.

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