Weis Markets accumulates large amounts of excess cash throughout the year. It typically invests these funds in marketable securities until they are needed. The company’s most recent financial statements revealed a nearly $14 million unrealized gain on short-term investments. Footnotes to the financial statements disclosed that Weis classifies its short-term investments as available-for- sale securities.
a. Explain the meaning of the company’s unrealized gain on short-term investments.
b. How does the unrealized gain impact the company’s financial statements?
c. Is the unrealized gain included in the computation of the company’s taxable income? Explain.
d. Evaluate the mark-to-market concept from the perspective of the company’s creditors.
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