Answered: At December 31, year 1, Charter Holding…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 26P

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At December 31, year 1, Charter Holding Co. owned the following marketable securities in capital stock of publicly traded companies. Cost Current Market Value L Brands, Inc. (5,000 shares: cost, $44 per share; market value, $52) $ 220,000 $ 260,000 The Gap, Inc. (4,000 shares: cost, $42 per share; market value, $39) 168,000 156,000 $ 388,000 $ 416,000 In year 2, Charter engaged in the following two transactions. Apr. 10 Sold 1,000 shares of its investment in L Brands, Inc., at a price of $58 per share, less a brokerage commission of $100. Aug. 7 Sold 2,000 shares of its investment in The Gap, Inc., at a price of $37 per share, less a brokerage commission of $150. At December 31, year 2, the market values of these stocks were: L Brands, Inc., $67 per share; and The Gap, Inc., $37 per share. Required: e. Prepare the fair value adjusting entry required at December 31, year 2. f-1. Calculate the amount of marketable securities in the financial statements at December 31, year 2. f-2. Calculate the amount of unrealized holding gain (or loss) in the financial statements at December 31, year 2. g. Illustrate the presentation of the net realized gains (or losses) in the year 2 income statement. Assume a multiple-step income statement and show the caption identifying the section in which this amount would appear.

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