Question

On its December 31, 2020, balance sheet, Pharoah Company reported its investment in equity securities, which had cost $640000, at fair value of $592000. At December 31, 2021, the fair value of the securities was $621000. What should Pharoah report on its 2021 income statement as a result of the increase in fair value of the investments in 2021?

Answer 1

Pharoah should report $ 29,000 as unrealised gain on its 2021 income statement.

Step-by-step explanation:

The Investments are valued at lower of cost or fair value.

On December 31,2020 investments were reported to bevalued at $ 592,000. According to the data On December 31, 2021 the fair value has raised to $ 621,000.

The Investments are valued at lower of cost or fair value.

Therefore, to calculate what should Pharoah report on its 2021 income statement as a result of the increase in fair value of the investments in 2021, we have the following calculation:

$621,000-$592,000=$29,000

Hence, Pharoah should report $ 29,000 as unrealised gain on its 2021 income statement.

Answer 2

$29,000

Step-by-step explanation:

Pharoah Company Income Statement

Fair value of the securities $621,000

Less fair value of investment in equity $592,000

Unrealized gain $29,000

Therefore Pharaoh report on its 2021 income statement as a result of the increase in fair value of the investments in 2021 will be an unrealized gain of $29,000