Question

ws On January 1,2016, a company's balance sheet reports its investments in financial instruments as follo 100.000 . ...207 544 Assets Equity Accumulated other comprehensive income: $4,000 tional information: M securities are $200,000 face value debt securities purchased on January 1,2014, at a yield of 4%. The securities have a 4-year total life and pay interest annually on December 31, at a coupon rate of 6%. The trading securities on hand on January I were sold in 2016 for $180,000. b. c. More trading securities were purchased for $100,000. They are still on hand at December 31, 2016,and d. AFS securities,originally purchased for $26,000 with a carrying value of $25,000 as of January 1,2016, e. AFS securities on hand at December 31,2016, have a fair value of $81,000 have a fair value of $125,000. were sold for $29,000

Answer 1

Sale value of AFS securities that were sold = $29,000

Less: Carrying value of AFS securities that were sold = $25,000

Gain on sale of AFS securities = $4,000

Total value of AFS securities is $100,000

Carrying value of AFS securities after the sale $75,000 ($100,000 - $25,000)

The market value of AFS securities is $81,000 at the end of 2016. That means, there is a gain of $6,000 ($81,000 - $75,000) at the end of 2016.

The total gain from AFS securities = $10,000 ($4,000 + $6,000).

Less: Unrealized gain (losses) on AFS securities = $4,000

Net gain on AFS securities = $6,000.

Therefore, the correct option is C. $6,000.