Question

Pashmina Tea House purchased debt securities during 2021 and classified them as securities available-for-sale: Security Cost...

Pashmina Tea House purchased debt securities during 2021 and classified them as securities available-for-sale:

Security

Cost

Fair Value, 12/31/2021

A

$

40,000

$

49,000

B

70,000

66,000

C

28,000

39,000

All declines are considered to be temporary. How much gain will be reported by Pashmina Tea House in the December 31, 2021, income statement relative to the portfolio?

A) $0.              B) $16,000                  C) $20,000

Homework Answers

Answer #1
Segment Cost fair value Unrealized gain/loss
A 40,000 49,000 9,000
B 70,000 66,000 -4,000
C 28,000 39,000 11,000
Total $138,000 $153,000 $16,000

gain to be reported in Dec 31, 2021, income statement relative to portfolio = $16,000

Correct option is (B)

In case of available for sale securities, unrealized gain/loss is recorded on the income statement of the current year.

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