eztomheducationcom Mail connect Intermediate Accounting 303

ezto.mheducation.com Mail connect. Intermediate Accounting 303: ACCT 303 01 Spring 2018 ACCOUNTING Chapter 12 HW Question 16 (of 16) 16. 10.00 points Adams Industries holds 60,000 shares of FedEx common stock. On December 31, 2015, and December 31,2016, the market value of the stock is $96 and $110 per share, respectively What is the appropriate reporting category for this investment and at what amount will it be reported in the 2016 balance sheet 4

Solution

Adams industries should report its investments in FedEx as available for sale securities and these investments should be reported at each balance sheet date at the market value on the respective balance sheet date. Any change in value go into a special account which is called \"Unrealized gain/(loss) in other comprehensive income (OCI)\".

In this question, the market value of investment on December 31, 2016 is $6,600,000 (60,000 shares*$110).

The market value of investment on December 31, 2015 is $5,760,000 (60,000 shares*$96).

Unrealized gain in Fedex stock = $6,600,000 - $5,760,000 = $840,000

Reporting of Investment in 2016 balance sheet :

Available for sale securities

Investment in Fedex stock = $6,600,000