Question

In: Accounting

Novi purchased ABC bonds on 1/1/21. Data regarding these available-for-sale securities follow:

Novi purchased ABC bonds on 1/1/21. Data regarding these available-for-sale securities follow:


    Cost

     MV

December 31, 2021

$150,000

$130,000

December 31, 2022

150,000

161,000

December 31, 2023

150,000

155,000

On 1/1/24, Novi sold $40,000 (cost) of the securities for $40,100. Market Value of the remaining securities at 12/31/24 was $108,000.

The net amount of Unrecognized Gain or Loss to appear in the Other Comprehensive Income section of the 2024 Comprehensive Income Statement is:

Select one:

a. $7,000

b. $2,000

c. $3,000

d. $2,100

e. $3,100

Solutions

Expert Solution

OPTION - 'B'
*Unrealised gain should be transferred to the other comprehensive income

*Realised gain should transfer to income statement.


Cost of securities after sale Amount

Total cost   $1,50,000

Cost of sold securities   ($40,000)

Cost of securuties after sale   $1,10,000

Market value of the remaining securities at 12/31/2024 ($1,08,000)

The net amount of Unrecognised Gain or Loss = $2,000


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