2. S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2018, S&L purchased Coca-Cola bonds for $820,000 and sold the bonds on...
2. S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2018, S&L purchased Coca-Cola bonds for $820,000 and sold the bonds on January 3, 2019 for $824,500. At December 31, the bonds had a fair value of $815,000.
What pretax amounts did S&L include in its 2018 and 2019 net income as a result of this investment (ignoring interest)?
| Pretax Amount | ||
| 2018 | ||
| 2019 |
Homework Answers
SOLUTION
Pretax income (2018) = Fair value as on December 31 - Purchase price
= $815,000 - $820,000
= $5,000 (Loss)
Pretax income (2019) = Sale value - Fair value as on December 31
= $824,500 - $815,000
= $9,500 Gain
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2. S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2018, S&L purchased Coca-Cola bonds for $820,000 and sold the bonds on...
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losses occurring in 2021 and (b) the sale of the bonds in 2022.(If no entry is required for a transaction/event, select
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