Question

On August 31, 2008, Stiggins Company purchased the following available-for-sale securities: Market Value

Security Cost December 31, 2008
D 96,000 84,000
E 152,000 158,000
F 162,000 146,000

On December 31, 2008, Stiggins reclassified its investment in security F from available-for-sale securities to trading securities. What total amount of loss on these securities should be included in Stiggins' income statement for the year ended December 31, 2008?

Answer 1

To calculate the total amount of loss on these securities that should be included in Stiggins' income statement for the year ended December 31, 2008, we need to consider the change in value of each security. The total amount of loss on these securities is $28,000.

Step-by-step explanation:

To calculate the total amount of loss on these securities that should be included in Stiggins' income statement for the year ended December 31, 2008, we need to consider the change in value of each security.

Security D:

The market value on December 31, 2008, is $96,000, and the cost is $84,000. Therefore, the loss on security D is $96,000 - $84,000 = $12,000.

Security E:

The market value on December 31, 2008, is $152,000, and the cost is $158,000. Therefore, there is no loss on security E.

Security F:

Since Stiggins reclassified its investment in security F from available-for-sale securities to trading securities, we can assume that the market value and the cost are the same on December 31, 2008. Therefore, the loss on security F is $162,000 - $146,000 = $16,000.

The total amount of loss on these securities is $12,000 + $0 + $16,000 = $28,000.