I just started investments today. For some reason, I have a hard time digesting the concept, especially when you transfer from Trading to Avail-for-Sale to Held-to-Maturity and getting the ending balance of Investment in Stocks.

whats the problem with it?  Like you are having trouble figuring out the carrying values?

Just think of it this way....

When transfered from Avail for sale, its like you purchased the asset again (at the current carrying (fair) value).  So, treat it like it's the amortized cost, like any other held to maturity.  All you need to do different is adjust the amort by the OCI you already recognized while avl-for sale (do this over the life)

Maybe that helps :)

I will continue my review today: All I understand is:

held-to-maturity - amortized cost (acq cost + - amort prem/disc)

trading - market to market (eg. compare market 08 vs market 07)

avail-for-sale - market to market ( I thought s/b the same as trading?)

but Wiley's MCQ Given below:

                                   Cost      Market 12/31/08    Market 12/31/07

Trading          ; ;       $150,000       $155,000        & ;nbs p;      $100,000

Avail-for-Sale       150, 000       130,000 &n bsp;         120,000

Question 1: Unrealized gain in 2008 Income Statement.

                  I got this right. Trading - 08 Market  155,000

                                          Less:& nbsp;   07 Market   100,000  $55,000

Question 2: Unrealized loss in 2008 OCI.

     S/B Avail-for-Sale - Market 08 = 130,000 vs Market 07 = 120,000

   But Ans: Avail-for-Sale - Cost = 150,000 vs Market 08 = 130,000

Please Note: There's no transfer in this problem.

My question: Does this mean that the cost reflected in this problem has been adjusted for Fair Value in 08?

I think the question asks about the balance in accumulated OCI for 2008 .

Unrealized loss on AFS for 2007 = 120,000 - 150,000 = (30,000)

Unrealized gain on AFS for 2008 = 130,000 - 120,000 = 10,000

Balance in AOCI as on Dec.31,2008 = (20,000) {which is in a way, 150000-130000}

The cost less unrealized loss for 2007 = FV at Dec.31, 2007 has been adjusted for FV at Dec.31,2008.

 If I go by the question, I would interpret it as "what adjustment is required for 2008 for AFS in Statement of OCI". However, the answer interprets it as "what is the total balance in AOCI for 2008".

Anyone ?