Question

On June 30, 2019, AlphaCo acquired a 15% interest in BetaCo (a public company) for $10,000,000 and received no special rights. On September 30, 2019, a new investor invested at a higher price indicating that the value of this investment had increased to $12,000,000. By December 31, 2019, the value of the investment in BetaCo had declined to $8,500,000. This decline in value was believed to be a result of an “other than temporary” situation. What gain or loss should be recorded by AlphaCo in its income statement for the 4th quarter of 2019 related to this transaction:

A.	Zero gain or loss
B.	$2,000,000 gain
C.	$1,500,000 loss
D.	$3,500,000 loss
E.	None of the above

Answer 1

Now in this case impairement loss is recognized a
Cost-Amortized cost
10000000-8500000	1500000	loss
Option C $1500000 loss
Impairement loss is recognized in income statement as difference between fair value and cost of investment, and the remaining loss is shown in unrealized loss under other comprehensive income. In this case the fair value was $12000000 and $2000000 gain was reogniozed as unrealized gain in sept qtr now there is unrealized loss of this $2000000 so that gain would be set off and (10000000-8500000=1500000 loss will be recognized
If any doubt please comment