Final answer:
Hobson Company should include a loss of $41,000 in its income statement for the year ended December 31, 2013. This figure is calculated by adding the losses on the fair value of each security and subtracting the previously reported unrealized loss.
Step-by-step explanation:
To determine the amount of loss Hobson Company should include in its income statement for the year ended December 31, 2013, we need to calculate the change in the fair value compared to the cost for each security. This can be done by comparing the fair value at the end of 2013 to the cost provided for each security.
- Security X: Cost = $380,000; Fair Value (FV) = $352,000; Loss = $380,000 - $352,000 = $28,000
- Security Y: Cost = $180,000; Fair Value (FV) = $160,000; Loss = $180,000 - $160,000 = $20,000
- Security Z: Cost = $420,000; Fair Value (FV) = $414,000; Loss = $420,000 - $414,000 = $6,000
The total loss for these securities at the end of 2013 is the sum of the losses calculated for each security: $28,000 (X) + $20,000 (Y) + $6,000 (Z) = $54,000. However, we must also consider the unrealized loss that had been reported in the previous year's income statement ($13,000), which would have already been recognized. Therefore, the amount of loss that should be included in the 2013 income statement is the change in unrealized loss from the end of 2012 to the end of 2013:
$54,000 (total loss at the end of 2013) – $13,000 (unrealized loss reported in the previous year) = $41,000.
Hence, Hobson Company should include a loss of $41,000 in its income statement for the year ended December 31, 2013.