Question

Fragrance International, a large perfume manufacturer, reported the following in its 2018 annual report to shareholders:

ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of accumulated other comprehensive income (loss) ("AOCI") included in the accompanying consolidated balance sheets consist of the following:

	YEAR ENDED JUNE 30
	2018				2017				2016
	($ in millions)
Net unrealized holding investment gains, beginning of year	$	2.9			$	13.9			$	6.1
Unrealized holding investment gains (losses)		(5.0	)			(18.3	)			13.0
Provision for deferred income taxes		2.0				7.3				(5.2	)
Net unrealized holding investment gains (losses), end of year		(0.1	)			2.9				13.9

CONSOLIDATED STATEMENTS OF CASH FLOWS

	YEAR ENDED JUNE 30
	2018				2017				2016
	($ in millions)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(203.2	)			(192.2	)			(180.9	)
Acquisition of businesses, net of acquired cash		(18.5	)			(16.0	)			(180.5	)
Purchases of long-term investments		--				--				(15.9	)
Proceeds from disposition of long-term investments		4.7				1.9				3.0
NET CASH FLOWS USED FOR INVESTING ACTIVITIES		(217.0	)			(206.3	)			(374.3	)

Investments sold during 2018 originally cost $3.0 million.

What was the after-tax realized gain or loss on the sale of available-for-sale securities in 2018? Assume a 40% tax rate. (Enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

Answer 1

From Cash flows statement:

Proceeds from disposition of long-term investments in 2018 = $4.7 million

Originally cost of Investments sold during 2018 = $3.0 million

Realized gain on the sale of available-for-sale securities in 2018 = $4.7 million - $3.0 million = $1.70 million

After-tax realized gain on the sale of available-for-sale securities in 2018 = $ 1.70 * (1 - 40%) = $1.02 million

After-tax realized gain on the sale of available-for-sale securities in 2018 = $1.02 million