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    10 Investment

    Uploaded by

    Paula Mae Dacanay
    The document contains information about Rainbow Corporation's investments in marketable securities as of December 31, 2007 and December 31, 2006. It shows that Rainbow should report an unrealized holding gain of $55,000 in its 2007 income statement for its trading securities, and an unrealized loss of $20,000 in accumulated other comprehensive income for its available-for-sale securities. It also contains information about Every Now and Then, Inc.'s portfolio of marketable investments for 2007, and calculates various carrying values and gains/losses based on the information provided.

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    10 Investment

    Uploaded by

    Paula Mae Dacanay
    21 views2 pages
    The document contains information about Rainbow Corporation's investments in marketable securities as of December 31, 2007 and December 31, 2006. It shows that Rainbow should report an unrealized holding gain of $55,000 in its 2007 income statement for its trading securities, and an unrealized loss of $20,000 in accumulated other comprehensive income for its available-for-sale securities. It also contains information about Every Now and Then, Inc.'s portfolio of marketable investments for 2007, and calculates various carrying values and gains/losses based on the information provided.

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    10 INVESTMENT

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    The document contains information about Rainbow Corporation's investments in marketable securities as of December 31, 2007 and December 31, 2006. It shows that Rainbow should report an unrealized holding gain of $55,000 in its 2007 income statement for its trading securities, and an unrealized loss of $20,000 in accumulated other comprehensive income for its available-for-sale securities. It also contains information about Every Now and Then, Inc.'s portfolio of marketable investments for 2007, and calculates various carrying values and gains/losses based on the information provided.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    21 views2 pages

    10 Investment

    Uploaded by

    Paula Mae Dacanay
    The document contains information about Rainbow Corporation's investments in marketable securities as of December 31, 2007 and December 31, 2006. It shows that Rainbow should report an unrealized holding gain of $55,000 in its 2007 income statement for its trading securities, and an unrealized loss of $20,000 in accumulated other comprehensive income for its available-for-sale securities. It also contains information about Every Now and Then, Inc.'s portfolio of marketable investments for 2007, and calculates various carrying values and gains/losses based on the information provided.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Problem 1

    The following data pertains to Rainbow Corporation’s investments in marketable securities:

    Market Value
    Cost 12/31/07 12/31/06
    Trading P 150,000 P 155,000 P 100,000
    Available-for-sale   150,000   130,000   126,000

    Questions
    1. What amount should Rainbow Corporation report as unrealized holding gain in its 2007
    income statement?
    a. P 65,000 b.  P 60,000 c.  P 55,000 d.  P 50,000

    2. What amount should Rainbow Corporation report as unrealized loss on marketable equity
    securities at December 31, 2007, in accumulated other comprehensive income in
    stockholders’ equity?
    a. P 20,000 b.  P 13,000 c.  P 10,000 d.  P 0

    Solution
    1. C
    Market value – 1/1/07 P 100,000
    Market value – 12/31/07   155,000
    Unrealized holding gain P     55,000
    2. A
    Cost P 150,000
    Market value – 12/31/07   130,000
    Unrealized holding loss P     20,000

    Problem 2
    The following information pertains to Every Now and Then, Inc.’s portfolio of marketable
    investments for the year ended December 31, 2007:

          Cost Fair Value 2007 activities  Fair value


    12/31/06     Purc.              Sales 12/31/07
    Held-to-maturity
        Security ABC P 100,000 P 95,000

    Trading Security
        Security DEFP 150,000 P 100,000   155,000

    Available-for-sale
    Security GHI   190,000   165,000 P 175,000
    Security JKL   170,000   175,000   160,000

    Security ABC was purchased at par.  All declines in fair values are considered to be
    temporary.

    Questions
    1. The carrying value of security ABC at December 31, 2007 is
    a. P 95,000 b.  P 98,000 c.  P 100,000 d.  P 105,000

    2. The carrying value of security DEF at December 31, 2007 is


    a. P 100,000 b.  P 120,000 c.  P 150,000 d.  P 155,000

    3. The carrying value of security JKL at December 31, 2007 is


    a. P 160,000 b.  P 165,000 c.  P 170,000 d.  P 175,000

    4. The recognized gain or loss on sale of security GHI is


    a. P (40,000) b.  P (25,000) c.  P (15,000) d.  P )10,000)

    5. The unrealized holding gain or loss to be reported in 2007 net income is


    a. P 55,000 b.  P (25,000) c.  P 15,000 d.  P (5,000)
    6. Unrealized gain or loss to be reported at December 31, 2007, as a separate component of
    stockholders’ equity entitled “accumulated other comprehensive income” is
    a. P (20,000) b.  P 15,000 c.  P (10,000) d.  P 5,000

    Solution
    1. C Cost since the security is considered as held-to-maturity
    2. D Market value at year-end
    3. A Market value at year-end
    4. C
    Selling Price P 175,000
    Cost   190,000
    Loss P( 15,000)
    5. A
    Market value – 1/1/07 P 100,000
    Market value – 12/31/07   155,000
    Unrealized holding gain P     55,000
    6. D
    Cost P 170,000
    Market value – 12/31/07   175,000
    Holding gain P       5,000

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