On January 10, Year 1, Box, Inc. purchased marketable equity securities of Knox, Inc.

and Scot, Inc. Box classified both securities as available-for-sale assets over which it
could not exercise significant influence. At December 31, Year 1, the cost of each
investment was greater than its fair market value. The loss on the Knox investment was
considered permanent and that on Scot was considered temporary. How should Box
report the effects of these investing activities in its Year 1 income statement?
I. Excess of cost of Knox stock over its market value.
II. Excess of cost of Scot stock over its market value.
a. An unrealized loss equal to I plus II.
b. No income statement effect.
c. A realized loss equal to I only.
d. An unrealized loss equal to I only.
c
Information regarding Stone Co.'s available-for-sale portfolio of marketable equity
securities is as follows:
Aggregate cost as of 12/31/Y2 $ 170,000
Market value as of 12/31/Y2 148,000
At December 31, Year 1, Stone reported an unrealized loss of $1,500 to reduce
investments to market value. This was the first such adjustment made by Stone on
these types of securities. In its Year 2 statement of comprehensive income, what
amount of unrealized loss should Stone report?
a. $20,500
b. $0
c. $22,000
d. $30,000
a
On July 2, Year 1, Wynn, Inc., purchased as an available-for-sale security a $1,000,000
face value Kean Co. 8% bond for $910,000 plus accrued interest to yield 10%. The
bonds mature on January 1, Year 7, and pay interest annually on January 1. On
December 31, Year 1, the bonds had a market value of $945,000. On February 13,
Year 2, Wynn sold the bonds for $920,000. In its December 31, Year 1, balance sheet,
what amount should Wynn report for available-for-sale investments in debt securities?
a. $945,000
b. $950,000
c. $920,000
d. $910,000
a
Sun Corp. had investments in marketable equity securities costing $650,000. On June
30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified
them from trading to available-for-sale on that date. The investments' market value was
$575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at
December 31, Year 2.
What amount of loss from investments should Sun report in its Year 2 income
statement?
a. $160,000
b. $120,000
c. $85,000
d. $45,000
d
Sun Corp. had investments in marketable equity securities costing $650,000. On June
30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified
them from trading to available-for-sale on that date. The investments' market value was
$575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at
December 31, Year 2.
What amount should Sun report as net unrealized loss on available-for-sale marketable
equity securities in its Year 2 statement of stockholders' equity?
a. $40,000
b. $45,000
c. $85,000
d. $160,000
a
On both December 31, Year 1, and December 31, Year 2, Kopp Co.'s only marketable
equity security had the same market value, which was below cost. Kopp considered the
decline in value to be temporary in Year 1 but other than temporary in Year 2. At the
end of both years the security was classified as an available-for-sale asset. Kopp could
not exercise significant influence over the investee. What should be the effects of the
determination that the decline was other than temporary on Kopp's Year 2 net available-
for-sale assets and net income?
a. Decrease in net available-for-sale assets and no effect on net income.
b. No effect on both net available-for-sale assets and net income.
c. No effect on net available-for-sale assets and decrease in net income.
d. Decrease in both net available-for-sale assets and net income.
c
At the end of Year 1, Lane Co. held trading securities that cost $86,000 and which had
a year-end market value of $92,000. During Year 2, all of these securities were sold for
$104,500. At the end of Year 2, Lane had acquired additional trading securities that cost
$73,000 and which had a year-end market value of $71,000. What is the impact of
these stock activities on Lane's Year 2 income statement?
a. Loss of $2,000.
b. Gain of $16,500.
c. Gain of $10,500.
d. Gain of $18,500.
c
Beach Co. determined that the decline in the fair value (FV) of an investment was below
the amortized cost and other than temporary. The investment was classified as
available-for-sale on Beach's books. The controller would properly record the decrease
in FV under U.S. GAAP by including it in which of the following?
a. Earnings section of the income statement and writing down the cost basis to FV.
b. Extraordinary items section of the income statement, net of tax, and writing down the
cost basis to FV.
c. Other comprehensive income section of the income statement only.
d. Other comprehensive income section of the income statement, and writing down the
cost basis to FV.
a
Cost Plus Inc.'s portfolio of marketable securities was as follows (all securities were
purchased in the current year):
Securities Purchase Price Year-end Fair Market Value
A One 10-year bond $1,500
(face value $1,000) $1,400
(carrying value $1,450)
B 100 shares common stock $30 per share $28 per share
C 50 shares preferred stock $100 per share $105 per share

Cost Plus intends to keep the A bond until maturity and to sell one half of its B common
stock investment next year. It is unsure of its intention for the remaining 50 shares of B
common stock and its 50 shares of C preferred stock. What amount of unrealized
gain/loss should be reported on this year's income statement as part of income from
continuing operations?
a. $50 gain.
b. $200 loss.
c. $100 loss.
d. $150 loss.
c
Ace, Ltd. reports under IFRS. For the current fiscal year, Ace showed the following
gains and losses related to its available for sale securities:
•Stock A, unrealized gain of $5,000
•Stock B, foreign exchange gain of $1,500
•Bond A, foreign exchange loss of $2,300
•Bond B, unrealized loss of $450
The amount that Ace will report as other comprehensive income is:
a. $6,050
b. $6,500
c. $4,550
d. $2,250

A company reporting under IFRS holds a position in BE Corp. bonds that it classifies as
available-for-sale. In the previous year, the company recorded an impairment loss
related to the bonds. In the current year, the company reversed a portion of the
impairment loss. How should the company account for the impairment loss reversal on
its current year financial statements?
a. Recognize the increase as an adjustment to the previous year's income statement.
b. Recognize the reversal to the current year's income statement.
c. Book the reversal to the current year's other comprehensive income.
d. Book the increase as an adjustment to the previous year's other comprehensive
income.
b