Question

Boulter, Inc. began business on January 1, 2013. At the end of December 2013, Boulter had the following investments in equity securities:

cost/FV
Trading:60000/54000
AFS: 110000/107500

All declines in value are deemed to be temporary in nature. How should the corresponding losses be reflected in the financial statements at December 31, 2013?

Answer 1

The corresponding losses for Boulter, Inc.'s investments in equity securities should be reflected in the financial statements at December 31, 2013 based on the accounting treatment for each type of security.

Step-by-step explanation:

The corresponding losses for Boulter, Inc.'s investments in equity securities should be reflected in the financial statements at December 31, 2013 based on the accounting treatment for each type of security.

For trading securities, which are held with the intent to sell in the near term for a profit, any declines in value are recorded as losses in the income statement.

For available-for-sale (AFS) securities, which are not held for short-term trading, any declines in value are not recognized in the income statement, but are instead reported as a separate component of stockholders' equity called accumulated other comprehensive income (AOCI).