On November 11, 2104, Wadsworth company purchased twenty sahres of ZZZ for $8 pe

Question

On November 11, 2104, Wadsworth company purchased twenty sahres of ZZZ for $8 per share. Wadsworth held the investment for the remainder of 2014, and as of December 31, the per-share market value of ZZZ had risen to $10. During 2015, Wadsworth sold ten shares of ZZZ for $9 each, and at the end of 2015, the per-share market price of the remaining ten shares was $12. During 2016, the remaining shares of ZZZ were sold for $14 each. Assume that Wadsworth held no other equity investments during this time period. A. complete the following. The first column assumes that the investment was classified as trading securities; the second column assumes that the investments was classified as available-for-sale securities. 1st column: trading 2nd column: available for sale 2014 income.....12/31/14 balance sheet investment value.....2015 income....12/31/15 balance and inestment sheet.... 2016 income....total income ('14+'15+'16). B. Comment on the differences.

Explanation / Answer

The losses and gains of trading securites attributed to the operating income whereas the losses and gains of aviable for sale securities are attributed to the unrealized gain/loss in other comprehensive income, which is located in stockholders' equity section of the balance sheet. This is main difference between them.

For Trading Secrities accounting is done as follows:

For avaibale for sale:

Trading Securities Date Purchase Value Fair Market Value Gain/Loss in Operating Income Comment 12/31/2014 160 200 0 12/31/2015 80 120 10 These were the 10 shares sold at $9 and the profit was $1 /share 12/31/2016 0 0 60 These were the 10 shares sold at $14 and the profit was $6 /share

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.