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Accounting for Marketable Equity Securities
Among the various responsibilities of the Chief Financial Officer (CFO) of the Amphlett Corporation was the management and oversight of the firm's cash reserves. During the year, the CFO had invested some of the firm's excess cash in what she thought were three undervalued stocks. All of the securities were classified as available-for-sale. At year-end, she reviewed how the portfolio of investments had done.
Basis Fair Value
at Year-End Bristol-Myers Squibb, Inc. $60,000 $48,000 Titanium Metals, Corp 50,000 55,000 Zila, Inc. 50,000 80,000 $160,000 $183,000
1. Calculate the value that would be assigned to the portfolio of marketable equity securities on the balance sheet of The Amphlett Corporation at year-end under each of the following approaches: a. Cost $ b. Lower-of-cost-or-market Individual-security basis $ Portfolio basis $ c. Fair value $
2. How will the appreciation of $23,000 be disclosed on the year-end financial statements if the entire portfolio is classified as: Trading securities Unrealized gain on the income statement
Component of other comprehensive income in the equity section of the balance sheet Available-for-sale securities Unrealized gain on the income statement
Component of other comprehensive income in the equity section of the balance sheet