Question

1. On December 31, 2018, HCTLA, Co. reported its investment in available-for-sale securities at $2,394,000, it's fair value on that day. The portfolio originally cost $2,176,000. On December 31, 2019, the fair value of the securities was $2,155,000 What will HCTLA, Co. report on its 2019 income statement as a result of the change in fair value during the year? (NIE 2)

   		($239,000)
   		($21,000)
   		$218,000
   		Nothing. This adjustment would be reported as Other Comprehensive Income.

5 points   

QUESTION 17

1. (5 points) During 2019, MRSA Co. purchased 268,000 shares of Western Corp.'s common stock for $3,216,000 with the intent to save the stock as part of an existing portfolio. The fair value of the shares was $4,342,000 at the end of 2019 and the company sold the shares for $5,428,000 in 2020. Based on this information, what should MRSA Co. report as an unrealized gain in 2019? (NIE 2)

   		$1,086,000
   		$1,126,000
   		$2,212,000
   		No gain would have been reported. This would have been recorded as a loss.

5 points   

QUESTION 18

1. (5 points) At the beginning of 2019, TFD, Inc. purchased 78,000 shares of TCV's common stock for $43/share and added them to its Expansion Fund, an available-for-sale portfolio. At the end of 2019, the stock had decreased in value to $30/share. At the end of 2020, the value had risen to $49/share. What should TFD, Inc. report as it's ending Fair Value Adjustment - Expansion Fund balance at the end of 2020? (NIE 2)

   		a debit of $468,000
   		a credit of $1,014,000
   		a debit of $3,822,000
   		a credit of $78,000

Answer 1

Answer to the 1st question- Nothing, this adjustment would be reported as Other Comprehensive Income (OCI).

This is because ,it is not a direct income to the company. This income may be recycled in the next year.

Answer to question 17- $1126000

This is because $4342000 -$ 3216000.

The company did not sell the shares in 2019. So the unrealised gain is the change in the fair value of the shares.

Answer to question 18 - a)a debit of $468000

In the year 2019 , is value decreased by 78000(43-30) i.e, $1014000. So the balance in the account would be $1014000.Then in the year 2020, it had risen by 78000(49-30) i.e, $1482000. Therefore it would 1st be adjusted with the previous decline of $1014000. The remaining balance in the account would be $1482000-$1014000= $ 468000