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afroz
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Joined: 22 Sep 2011
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Posted: 07 Apr 2012 at 20:19 \| IP Logged

Victor Corporation has the following investments in equity securities. No entries have been made to adjust the investment accounts at December 31, 2010. Victor does not elect the fair value option to report its financial assets.

• 10,000 shares of Stock A. Stock A was acquired on April 1, 2009, for $20 per share. Management has no immediate plans to sell the stock. On December 31, 2009, the market value of Stock A was $22 per share. On July 1, 2010, the company received $0.10 per share dividend on each share of Stock A. On December 31, 2010, the market value of the stock was $17 per share.

so whats the unrealized loss to be reported on OCI as its a Available-for -sale security?

The question mention that "Victor does not elect the fair value option to report its financial assets" so my question is though we know Avaial-for-sale security is measured at fair value; in this case unrealized loss should be calculated based on cost($20) rather than the fair value ($22) or its a just dis-tractor information? Please help

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sharmin afroz

Khan_Windsor
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Posted: 07 Apr 2012 at 22:49 \| IP Logged

this question doesn't seem complete?
in 2009 , there was a $20000 GAIN and
2010 , there was a unrealized loss $50,000 loss

in OCI, net amount will be $30000 loss

Please correct me if i am wrong

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audreyP
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Posted: 07 Apr 2012 at 23:15 \| IP Logged

On comprehensive income statement, oci--unrealized loss is reported
at 50,000.
On balance sheet, aoci will be 30,000.

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afroz
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Posted: 08 Apr 2012 at 00:46 \| IP Logged

@ khan_windsor in 2009 the cost was @20 per share and at the end of the year the Market value is @ 22 per share, so unrealized lGain should report in OCI of 20,000, and in 2010 the Market value is @17 per share so the amount of unrealized loss should be reported in OCI in the amount of 50,000.

@ audrey, its a Avail-for -sale security so it should be measured at FV, but as the question say the company does not elect the fair value option to report its financial assets, so i was confused whether i need to calculate 2010 loss based on cost ($20) or FMV ($22)?

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sharmin afroz

hottstuff23
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Posted: 08 Apr 2012 at 03:30 \| IP Logged

i agree with @afroz if it says do not use fmv then u will use the carrying amount rite ?

i hope so cpa exam in a week and half o boy hahah

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