Question

1. Weazley Ltd. purchased several investments in equity securities during 2019 for liquidity management its first year of operations. The following information pertains to these securities. The investments are classified as minority passive.

Trading Securities:	Fair Value 31 Dec 2020			Fair Value 31 Dec 2019			Cost
Acme Inc Equity	$	247,000		$	177,000		$	139,000
Pacman Inc Equity	$	144,000		$	238,500		$	132,900

Acme announced an earnings of $34,500 and Pacman announced an earnings of $45000. None of these investments are sold during the year. What is the amount of the net unrealized gain/loss reported on the income statement in 2020 related to these investments?

Answer 1

answer:-

given:

1. cost of securities:

Acme Inc equity = 139000

Pacman Inc equity = 132900

2. fair value of stock on dec 31 2020

Acme Inc equity = 247000

Pacman Inc equity = 144000

to calculate unrealised gain or loss on an investment, Subtract your cost from the fair value value to figure your unrealized gain or loss.

here, unrealised gain or loss on Acme Inc equity can be calculated as:

fair value - cost = 247000-139000 = $108000

and unrealised gain or loss on Pacman Inc equity can be calculated as:

fair value - cost = 144000 - 132900 = $11100

net urealised gain or loss on investment that should be reported on the income statement in 2020 = 108000+11100 = $119100.

note: here the investment has reported unrealised gain and there are no unrealised losses. investments will report loss only if their current value is less than their cost.