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متابعة

The following information pertains to XYZ Corp.’s available-for-sale securities:

      December31

Year2                Year3

Cost $100,000        $100,000

Fair value90,000          120,000

Differences between cost and fair values are considered to be temporary. The decline in fair value was properly accounted for at December31, Year2. Ignoring tax effects, by what amount should other comprehensive income (OCI) be credited at December31, Year3?

         A. $0

B. $10,000

C. $20,000

D. $30,000

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تم إضافة السؤال من قبل مستخدم محذوف‎
تاريخ النشر: 2015/02/23
ahmed amin
من قبل ahmed amin , Audit supervisor , KPMG

D - the correct answer is $30,000 as this is the new fair value.

Ahmer Zamir
من قبل Ahmer Zamir , Consultant , Saleem Associates & Co

The correct option is $30,000

The rational of the option is that Investment available for sale records at fair value of investment at balance sheet  any gain and loss report as unrealized gain/loss reports  in other Comprehensive Income at at end of each year till disposal.

In this example unrealized  loss reported amounting $(90,000-100,000=-10,000) in the year2 in the other comprehensive income and reduced the value of investment and reported as separate part of shareholders equity .

In the year3 the fair value of Investment was $120,000 , so that unrealized gain reported amounting $(120,000-90,000=30000).The main point is that to compute gain cost doesn't take into account because available for sales investment record at fair value at each balance sheet date.