[Anonymous]

Cost Market Value

12/31/Y2 12/31/Y1

Trading $150,000 $155,000 $100,000

Available-For-Sale $150,000 $130,000 $120,000

Question #1: What amount should be reported as net unrealized loss on available-for-sale marketable equity securities at December 31, year 2, in accumulated OCI on the B/S?

Answer: $20,000…….$150,000-$130,000

Shouldn’t the answer be $10,000 unrealized gain?

Question #2: What amount should be reported as unrealized gain (loss) in its year 2 I/S?

Answer: $55,000

Make sense.

Aren’t they using two different logic to answer similar questions? Or am I missing something? Question #1 asks about NET amount while question #2 simply asks for the amount? Is that it?

Just making sure…

[Anonymous]

I might be totally off base with this because its hard to tell which figures for question 1 relate to cost/market value for each year. That being said, question 1 asks for the amount listed in accumulated OCI on the B/S for year 2, and it appears that the net amount is the 150000 cost less the 130000 FV at year 2 year end. Despite there being an unrealized gain for year 2 in the AFS security, the net amount for the holding period of the securities (which is shown net in accumulated OCI) is a 20000 loss.

Question 2 relates only to the trading security because it is asking for the I/S only, with no regard to accumulated OCI or AFS securities. Thus, the trading security gain from year one to year two is included with the I/S. In year one, there would have been a 50000 loss reported (150000 cost less 100000 FV), and the subsequent increase in fair value recorded as the gain in year two.

[mgoloubenko]

Available for sale securities are not marked to market at year end, as trading securities are.

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[Anonymous]

mgoloubenko: Are you sure? I believe both Trading & Available for sale securities are reported at mark to market value!

[mgoloubenko]

My take on it was that trading securities since they're reported directly in income are revalued at the market rate at year end, while available for sale securities are more of a rolling balance in OCI.

FAR 4/9/12- PASSED
BEC 7/13/12- PASSED
AUD 8/16/12- Ughhh 71, Rematch: 90!!!
REG-12/6/12 PASSED

USC MAcc- Fight on!

They say good things come to those who wait, but only those things that are left by those who hustle.

[Anonymous]

^ my take as well

[Anonymous]

That's true…but AFS are also revalued at FV and are adjusted same as Trading securities (aka by using valuation account J/E). Only difference is that unrealized gain/losses are reported on I/S for Trading and on OCI for AFS.

[mgoloubenko]

Sometimes during practice questions, there are certain assumptions I make and I haven't seen anything other questions that have been handled differently in the material.

FAR 4/9/12- PASSED
BEC 7/13/12- PASSED
AUD 8/16/12- Ughhh 71, Rematch: 90!!!
REG-12/6/12 PASSED

USC MAcc- Fight on!

They say good things come to those who wait, but only those things that are left by those who hustle.

[Anonymous]

that is true, but the question asked for the net loss in accumulated OCI, which is 20000 (30000 loss in year one net of 10000 gain in year two).

[Anonymous]

@bobooh15: Perfect!! Thank you!!! I was thinking that as I was typing it out, but wanted to make sure my logic was right!! Appreciate it!!

[Author]

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