Can someone please tell me why the net cumulative loss in OCI to report would not be the $1,500 unrealized loss reported in Y1 + The $22,000 unrealized loss is Y2 for a net cumulative loss of $23,500?
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. $30,000
b. $20,500
c. $22,000
d. $0
Explanation
Choice “b” is correct. Stone must report a net cumulative loss on its Statement of Stockholders' Equity (under “Accumulated
Other Comprehensive Income”) of $22,000 ($148,000 FMV $170,000 Cost). Stone has already reported a $1,500 loss as of
12/31/Y1; therefore, an unrealized loss of $20,500 ($22,000 $1,500) should be reported in the Statement of Comprehensive
Income (as part of other comprehensive income) for Year 2.
.