regarding ccra module1

agarwalla.harsha
Posts: 7
Joined: Tue Jul 14, 2015 6:55 am

regarding ccra module1

Postby agarwalla.harsha » Wed Oct 07, 2015 10:07 am

at the beginning of the year company p purchased 1000 shares of company s for $80 per share.during the year company s paid a dividend of $4 per share. at the year company s share price was $75. what amount of investment income should company p recognise in its income statement if the investment in company s is considered trading and what amount should be recognised if investment is considered available for sale.

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: regarding ccra module1

Postby edupristine » Wed Oct 07, 2015 1:00 pm

A loss of $1000 will be recognized in the income statement if the securities are considered trading securities. Dividend of $4 x 1000 shares less unrealized loss of $5 x 1000 shares. Because for trading securities unrealized gain and losses are considered in income statement.
And Income of $4000 will be shown in income statement if the investment is taken as available-for-sale ($4 dividend x 1000) in company S. Because for Available for sale securities, unrealized gains and losses are not considered in income statement. And rest of the $5000 will be shown in statement of owner’s equity.


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