Question

At the end of its first year, the available for sale debt securities portfolio consisted of the following common stocks: Cost Fair Value 12/31/17 Atrium Corporation $ 46,500 $ 50,000 Barnes Inc. 60,000 58,000 Cantor Corporation 80,000 76,400 Based on the above information, the unrealized loss to be reported in the 2017 income statement under the fair value method is Select one: a. $3,600. b. $5,600. c. $2,100. d. $9,100. e. None of the provided answer choices are correct.

Answer 1

The correct option is -$2,100

Step-by-step explanation:

The unrealized loss to be reported in the 2017 income statement under the fair value method is computed by computing the difference between fair value and cost for each stocks invested in, it is computed on stock by stock basis:

Atrium corporation fair value less cost($50,000-$46,500)=$3500

Barnes Inc, fair value less costs($58,000-$60,000) =-$2000

Cantor corporation fair value less costs($76,400-$80,000)=-$3600

Unrealized loss -$2,100

Option A is wrong since $3,600 is just the unrealized loss on Cantor corporation stock

Option B is wrong because $5600 loss is just considering two stocks