Question

On December 30, 2018, Varsity Corporation sold available for sale marketable securities costing $800,000 for $860,000 cash. The securities were purchased on January 2, 2016 and the market value of the securities on December 31, 2016 and December 31, 2017 was $820,000 and $780,000, respectively. How much gain or loss will Varsity report in its income statement for the year ending December 31, 2018

Answer 1

The gain reported is $60,000

Step-by-step explanation:

The computation of the gain or loss reported is as follows;

Book value as on December 31 2017 $780,000

Add: balance of unrealized loss ($40,000 loss - $20,000 gain) $20,000

Total $800,000

Gain (sale value - total) ($860,000 - $800,000) $60,000

hence, the gain reported is $60,000