Syracuse, Inc. reported net income of $202,052 thousand for fiscal 2017. The annual report included the...

Syracuse, Inc. reported net income of $202,052 thousand for fiscal 2017. The annual report included the following details about its available-for-sale debt securities:

(in thousands)	2017	2016
Cost of available-for-sale debt securities	$102,907	$83,849
Gross unrealized gains	3,602	1,694
Gross unrealized losses	(1,198)	(2,434)

a. What amount appeared on Syracuse’s balance sheet in 2017 for available-for-sale debt securities?

b. If Syracuse had instead classified these debt securities as trading, what would net income have been? Assume a marginal tax rate of 37% for your calculations.

Expert Solution

a.	Available for sales securities are reported at Fair-Value on the balance sheet.
	Fair value of available-for-sale debt for 2017:
	Cost of available-for-sale debt	$102,907
	Add:Gross unrealized gain for 2017	$3,602
	Less:Gross unrealized loss for 2017	$(1,198)
	Fair value of available-for-sale debt	$105,311

b.	If Syracuse had classified the securities as trading then it has to adjust the change in unrealized gain/(loss)
	The calculation for change in unrealized gain/(loss) is as follows:
	Net unrealized loss in 2016(1,694-2,434)	$740
	Net unrealized Gain in 2017(3,602-1,198)	$2,404
	Net change in unrealized gain for 2017
	($740+$2,404)	$3,144
	Less:Tax @ 37% on Net change	$1,163.28
	Net change in unrealized gain after tax for 2017	$1,980.72

	So Net Income would be increased by $1,980.72
	Net income after adjusting net change in unrealized gain = $202,052+$1,980.72 =$204,032.72

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