Question

Accounting for Marketable Equity Securities
Among the various responsibilities of the Chief Financial Officer (CFO) of the Amphlett Corporation was the management and oversight of the firm's cash reserves. During the year, the CFO had invested some of the firm's excess cash in what she thought were three undervalued stocks. All of the securities were classified as available-for-sale. At year-end, she reviewed how the portfolio of investments had done.

Investment	Cost Basis	Fair Value at Year-End
Bristol-Myers Squibb, Inc.	$60,000	$48,000
Titanium Metals, Corp	50,000	55,000
Zila, Inc.	50,000	80,000
	$160,000	$183,000

Required

1. Calculate the value that would be assigned to the portfolio of marketable equity securities on the balance sheet of The Amphlett Corporation at year-end under each of the following approaches:

a.	Cost	$
b.	Lower-of-cost-or-market
	Individual-security basis	$
	Portfolio basis	$
c.	Fair value	$

2. How will the appreciation of $23,000 be disclosed on the year-end financial statements if the entire portfolio is classified as:

Trading securities	Unrealized gain on the income statement OR Component of other comprehensive income in the equity section of the balance sheet
Available-for-sale securities	Unrealized gain on the income statement OR Component of other comprehensive income in the equity section of the balance sheet

Answer 1

ANSWER:-

(A) cost basis: It means the investment is recorded in balance sheet based on the cost at which it is acquired. Here it is 160,000

(B) Lower of cost or market:individual security basis. It means we will lower of the both considering each investment independently.
Bristol =   $48,000
Titanium= $50000
Zila =   $50000
Total = $148,000
Portfolio basis: here we will see overall portfolio and it s $160,000

(C) Fair value is based on latest value of the investment and it is $183,000

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ACCORDING TO HOMEWORKLIB POLICY WE ANSWERED PART 1 ONLY.

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