Question

On December 31, Mars Co. had the following portfolio of stock investments with insignificant influence. Mars had no stock investments in prior periods.

Portfolio of Stock Investments	Cost			Fair Value
Apple stock	$	8,400		$	11,200
Chipotle stock		7,200			4,700
Under Armour stock		12,800			14,900

1. After the fair value adjustment is made, prepare the assets section of Mars Co.’s December 31 classified balance sheet. Assume Mars plans to sell its trading securities within the next six months.
2. In which income statement section is the unrealized gain (or loss) on the portfolio of stock investments reported?

Answer 1

Requirement 1 Since, the trading securities are planned to be sold within next 6 months, the securities shall be stated at their fair values. The asset section of Mars Co. as on December 31 shall be- Balance Sheet As at December 31 Investments Apple Stock Chipotle Stock Under Armour Stock Total $ 11,200 $ 4,700 $ 14,900 $ 30,800 Requirement 2 The unrealized gain or loss from stock investments shall be reported under non-operating items of the income statement. Income Statement For the Year ending December 31 Non-Operating items Unrealized gain on Apple Stock (11200-8400) $ Unrealized loss on Chipotle Stock (7200-4700) $ Unrealized gain on Under Armour Stock (14900-12800) $ Net Unrealized gain $ 2,800 (2,500) 2,100 2,400