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During 2023, Moore Capital purchased 5,000 shares of the 500,000 outstanding shares of Fisher Inc.’s common...

During 2023, Moore Capital purchased 5,000 shares of the 500,000 outstanding shares of Fisher Inc.’s common stock for $35,000. During 2023, Moore received $1,800 of dividends from its investment in Fisher’s stock. The fair values of Moore’s investment on December 31, 2023, is $32,000. Moore has elected the fair value option for this investment. What amount of income or loss that is attributable to the Fisher stock investment should be reflected in the Moore’s earnings for 2023?

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Answer #1

Moore Capital Purchase Value of common stock of Fisher Inc during 2023= $35,000

Dividend received during the year = $1,800

Fair value of Moore Investment in Fisher Inc at 31 December 2023 = $32,000

Moore has elected fair value option for this investment.

When a company elects to value investment basis fair value, any change in fair value will be taken to Income statement. Similarly any dividend received will be considered in Income statement.

Thus, in Moore's earnings for 2023, the following will be shown:

Reduction in fair value of investments in Fisher Inc = $35,000-$32,000 = $3,000 (loss)

Dividend received during the year = $1,800 (gain).

Net Loss shown in Moore's earnings for 2023 relating to Fisher stock investment= -$3,000+$1,800 = -$1,200

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