Question 1 On March 1, 20 16 Jingle Bells Corp, purchased 2,000 shares of Winter

Question

Question 1 On March 1, 20 16 Jingle Bells Corp, purchased 2,000 shares of Winter Wonderland Wholesale for S45 per share. Jingle Bells Corp. classifes the investment as available-for-sale. On December 31, 2016 the shares of Winter Wonderland Wholesale had a current market value of $40 per share. What amount of realized gain or loss would Jingle Bells Corp. report on its 2017 income statement if Jingle Bells Corp. sells the 2,000 shares of Winter Wonderland Wholesale on July 1, 2017 for $42 per share? $6,000 gain $10,000 loss $4,000 loss $6,000 loss $4,000 gain

Explanation / Answer

Answer : $6,000 loss (option c)

Explanation : When investment held as available for sale is sold then the difference between the selling price & original cost is reported as realise gain or loss in income statement.

( $42 - $45 ) * 2,000 shares = $6,000 loss

  

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