[Anonymous]

Data regarding Ball Corp’s available for sale securities follow:

COST MV

December 31, Year 1 $150,000 $130,000

December 31, Year 2 $150,000 $160,000

Differences between cost and market values are considered temporary. The decline in market value was considered temporary and was properly accounted for at December 31, Year 1. Ball’s year 2 stmt of changes in SE’s would report an increase of:

Answer is $30,000 (Okay make sense, $130,000 to $160,000 = $30,000 increase)

Question 2:

The following information pertains to Smoke, Inc’s investment in marketable securtities:

-An available for sale marketable equity security costing $75,000 written down to $30,000 in Year 1, had a $60,000 fair value on December 31, Year 2. Smoke believes the recovery is permanent.

Answer: $30,000 decrease

How did they get it?

75,000 – 30,000 = 45,000 loss in Year 1. 75,000 – 60,000 = 15,000. 45,000 – 15,000 = 30,000.

I’m so confused. This is supposed to be an easy concept, but these questions are confusing me. Help???

[Nbkna2c]

Ah I got it, the second one is talking about backing out $30k of the $45k unrealized loss in year (reclassification) in OCI. Am I right? Perhaps someone else can chime in.

BEC 78
REG 84
AUD 76
FAR 83

[Anonymous]

So, here's the rule I made up:

If the loss temp: Use the FV to calculate unrealized G/L (in OCI)

If it doesn't say it's temp or perm: Then use the cost to calculate G/L (in OCI).

If the loss is perm: Use the original cost to calculate G/L (which goes to I/S, btw). Carrying amount will be the current FV.

I don't know if my understand is right or wrong, but this is the only way it kinda makes sense to me.

[Nbkna2c]

That's the rule in my head. 🙂

BEC 78
REG 84
AUD 76
FAR 83

[misanthrope87]

@CPA628

Do you have any insight for my governmental question?? No one seems to have an answer that's 100% sure.

https://www.another71.com/cpa-exam-forum/topic/governmental-question

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[Author]

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