Problem 1. Gene Company has a portfolio of trading securities as of December 31, 2020 as follows:   Cost Fair Value 15,000 ordinary shares of Terry Co. P    477,000 P     417,000 30,000 ordinary shares of Gina Co.       546,000        570,000   P1,023,000 P    987,000 All of the above securities were purchased in 2020.  The following transactions related to the securities occurred in 2021: Mar 1. Sold 15,000 shares of Terry Co. at P31 less brokerage commission of P4,500. Apr 1. Bought 1,800 shares of Wendy Co. at P45 plus commission, taxes, and other transaction costs of P1,650. On December 31, 2021, the Company’s investment portfolio appears as follows:   Cost Fair Value 30,000 ordinary shares of Gina Co. P    546,000 P     580,000 1,800 ordinary shares of Wendy Co.          82,650           75,000   P    628,650 P     655,000 The fair values excludes the estimated transaction costs that would be incurred on the sale of Gina Co. and Wendy Co. shares at P6,500 and P1,500, respectively. Required: What amount of unrealized gain on these securities should be reported in 2021 income statement?  What is the gain or loss on the sale of Terry Co. ordinary shares on Mar 1, 2021?  What amount should be reported trading securities in Gene Company’s statement of financial position on December 31, 2021?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Problem 1. Gene Company has a portfolio of trading securities as of December 31, 2020 as follows:

 

Cost

Fair Value

15,000 ordinary shares of Terry Co.

P    477,000

P     417,000

30,000 ordinary shares of Gina Co.

      546,000

       570,000

 

P1,023,000

P    987,000

All of the above securities were purchased in 2020.  The following transactions related to the securities occurred in 2021:

Mar 1. Sold 15,000 shares of Terry Co. at P31 less brokerage commission of P4,500.

Apr 1. Bought 1,800 shares of Wendy Co. at P45 plus commission, taxes, and other transaction costs of P1,650.

On December 31, 2021, the Company’s investment portfolio appears as follows:

 

Cost

Fair Value

30,000 ordinary shares of Gina Co.

P    546,000

P     580,000

1,800 ordinary shares of Wendy Co.

         82,650

          75,000

 

P    628,650

P     655,000

The fair values excludes the estimated transaction costs that would be incurred on the sale of Gina Co. and Wendy Co. shares at P6,500 and P1,500, respectively.

Required:

  1. What amount of unrealized gain on these securities should be reported in 2021 income statement? 
  2. What is the gain or loss on the sale of Terry Co. ordinary shares on Mar 1, 2021? 
  3. What amount should be reported trading securities in Gene Company’s statement of financial position on December 31, 2021?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 6 images

Blurred answer
Knowledge Booster
Investments and Financial instruments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education