Question

Cost U reported at December 31, 2017 and 2018 P17-19 (LO2,4) (Equity Securities-Statement Presentation) Fernandez Corp. invested its excess cash in securities during T. As of December 31, 2017, the securities portfolio consisted of the following common stocks Security Quantity Cost Fair Value Lindsay Jones, Inc. 1,000 shares $ 15,000 $ 21,000 Poley Corp. 2.000 shares 40,000 42,000 Arnold Aircraft 2,000 shares 72.000 60.000 Totals $127,000 $123,000 Instructions (a) What should be reported on Fornandez's December 31, 2017, balance sheet relative to these securities? What should be reported on Fernandez's 2017 income statement? On December 31, 2018. Fernandez's securities portfolio consisted of the following common stocks, Security Quantity Fair Value Lindsay Jones, Inc. 1,000 shares $15.000 $20,000 Lindsay Jones, Inc. 2,000 shares 33.000 40,000 Duff Company 1,000 shares 16,000 12,000 Arnold Aircraft 2,000 shares 72,000 22,000 Totals $136,000 $94.000 During the year 2018, Fernandez Corp. sold 2,000 shares of Poley Corp. for $38,200 and purchased 2,000 more shares of Lindsay Jones, Inc. and 1,000 shares of Duff Company. (b) What should be reported on Fernandez's December 31, 2018, balance sheet? What should be reported on Fernandez's 2018 income statement? On December 31, 2019, Fernandez's securities portfolio consisted of the following common stocks. Security Quantity Cost Fair Value Arnold Aircraft 2,000 shares $72,000 $82,000 Duff Company 500 shares 8,000 6,000 Totals $80,000 $88,000

Answer 1

Requirement a: The company would report investment in either current or non-current assets section of balance sheet depending on the intention of the company as follows

F Corp
Balance Sheet (Partial)
December 31, 2017
Assets	Amount
Equity Investments – Fair value	$123,000

The company would report unrealized holding loss in income statement as follows

F Corp
Income Statement (Partial)
For the Year Ended December 31, 2017
Particulars	Amount
Other Expenses and Losses
Unrealized holding loss ($123,000 − $127,000)	$4,000

Requirement b: The Company would report investments in balance sheet and income statement in 2018 as follows

F Corp
Balance Sheet (Partial)
December 31, 2018
Assets	Amount
Equity Investments – Fair value	$94,000

The Company would report the following information in income statement

F Corp
Income Statement (Partial)
For the Year Ended December 31, 2018
Particulars	Amount
Other Expenses and Losses
Loss on sale of investments ($40,000 − $38,200)	$1,800
Unrealized holding loss ($136,000 − $94,000 − $4,000)	$38,000

Requirement c: The Company would report investments in balance sheet in 2019 as follows

F Corp
Balance Sheet (Partial)
December 31, 2019
Assets	Amount
Equity Investments – Fair value	$88,000

The Company would report the following information in income statement

F Corp
Income Statement (Partial)
For the Year Ended December 31, 2019
Particulars	Amount
Other Expenses and Losses
Loss on sale of investments ($15,000 + $33,000 − $39,900) + $2,700	$10,800
Unrealized holding gain	$46,000

Notes: Compute unrealized holding gains or losses as follows

Year	Cost	Fair Value	Unrealized Gain / (Loss)	Recognized in previous year	Gain / (Loss) in Income Statement
2017	$127,000	$123,000	($4,000)	$0	($4,000)
2018	$136,000	$94,000	($42,000)	($4,000)	($38,000)
2019	$80,000	$88,000	$8,000	($38,000)	$46,000