【文章內容簡介】 gains and losses–OCI......................... 8Requirement 2 Investment revenue .......................... $3 millionNote: An unrealized holding gain is not included in ine for securities availableforsale. Rather, it is included in other prehensive ine, and accumulated in shareholders’ equity in accumulated other prehensive ine.Chapter 12 Investments1212Exercise 1291. Investments reported as current assets.Security A $ 910,000Security B 100,000Security C 780,000Security E 490,000 Total $2,280,0002. Investments reported as noncurrent assets.Security D $ 915,000Security F 615,000$1,530,0003. Unrealized gain (or loss) ponent of ine before taxes.Trading Securities:Cost Fair value Unrealized gain (loss)Security A $ 900,000$ 910,000 $10,000B 105,000 100,000 (5,000)Totals $1,005,000 $1,010,000 $ 5,0004. Unrealized gain (or loss) ponent of AOCI in shareholders’ equity.Securities AvailableforSale:Cost Fair value Unrealized gain (loss)Security C $ 700,000$ 780,000 $80,000D 900,000 915,000 15,000Totals $1,600,000 $1,695,000 $95,000Chapter 12 Investments1213Exercise 1210Requirement 1 Accumulated ($ in 000s) UnrealizedAvailableforSale Securities Cost Fair Value Gain (Loss)IBM shares – Dec. 31, 2022 $1,345 $1,175 $(170)Moving from a negative $145 () to a negative $170 requires a reduction of $25:170 145 0 – 25 Net unrealized holding gains and losses–OCI........................ 25,000Fair value adjustment ($1,175,000 – 1,200,000) ................... 25,000Fair Value AdjustmentBalance needed in fair value adjustment ($170)Existing balance in fair value adjustment: ($145) Increase (decrease) needed in fair value adjustment: ($ 25)Chapter 12 Investments1214Exercise 1210 (continued)Requirement 2 Accumulated ($ in 000s) UnrealizedAvailableforSale Securities Cost Fair Value Gain (Loss)IBM shares – Dec. 31, 2022 $1,345 $1,275 $(70)Moving from a negative $145 () to a negative $70 requires an increase of $75:145 70 0+75 Fair value adjustment ($1,275,000 – 1,200,000) ........................ 75,000Net unrealized holding gains and losses–OCI ................. 75,000Fair Value AdjustmentBalance needed in fair value adjustment ($ 70)Existing balance in fair value adjustment: ($145) Increase (decrease) needed in fair value adjustment: $ 75Chapter 12 Investments1215Exercise 1210 (concluded)Requirement 3 Accumulated($ in 000s) UnrealizedAvailableforSale Securities Cost Fair Value Gain (Loss)IBM shares – Dec. 31, 2022 $1,345 $1,375 $30Moving from a negative $145 () to a positive $30 requires an increase of $175:145 70 0 +30+175 Fair value adjustment ($1,375,000 – 1,200,000) ........................ 175,000Net unrealized holding gains and losses–OCI ................. 175,000Fair Value AdjustmentBalance needed in fair value adjustment $ 30Existing balance in fair value adjustment: ($145) Increase (decrease) needed in fair value adjustment: $175Chapter 12 Investments1216Exercise 1211Requirement 1The sale of the A Corporation shares decreased Harlon’s pretax earnings by $5 million. The purchase of the C Corporation shares had no effect on Harlon’s 2022 earnings (because the shares are classified as availableforsale investments, any unrealized gains or losses occurring after purchase during 2022 would not affect 2022 earnings). Here are the entries used to record those two transactions:June 1, 2022 ($ in millions)Cash 15 Loss on sale of investments (difference) 5Investment in A Corporation shares (cost) 20September 12, 2022Investment in C Corporation shares 15Cash 15Chapter 12 Investments1217Exercise 1211 (concluded)Requirement 2Harlon’s securities availableforsale portfolio should be reported in its 2022 balance sheet at its fair value of $101 million:December 31, 2022($ in millions) Cost, Dec. 31 Fair Value, Dec. 31 Securities AvailableforSale 2022 2022 2022 2022A Corporation shares $20 na $14 naB Corporation bonds 35 $35 35 $ 37C Corporation shares na 15 na 14D Industries shares 45 45 46 50 Totals $100 $95 $95 $101In 2022, Harlon would have had a unrealized loss of $5 (cost of $100 – fair value of $95). Moving from a negative $5 (2022) to a positive $6 requires an increase of $11:5 0 +6+11 Fair value adjustment ($5 credit to $6 debit) 11Net unrealized holding gains and losses–OCI 11The adjustment has no effect on earnings. Unlike for trading securities, unrealized holding gains and losses are not included in ine for securities availableforsale. Rather, they are included in other prehensive ine, and accumulated in shareholders’ equity in accumulated other prehensive ine.Fair Value Adjustment AllowanceBalance needed in fair value adjustment $ 6Existing balance in fair value adjustment: (5) Increase (decrease) needed in fair value adjustment: $11Chapter 12 Investments1218Exercise 1212Requirement 1 The investment would be accounted for as an availableforsale investment:PurchaseInvestment in AMC mon shares.................................... 480,000Cash ............................................................................... 480,000Net ineNo entryDividendsCash (20% x 400,000 shares x $)......................................... 20,000Investment revenue......................................................... 20,000Adjusting entryFair value adjustment ($505,000 – 480,000) ............................ 25,000Net unrealized holding gains and losses–OCI ................ 25,000Requirement 2 The investment would be accounted for using the equity method:PurchaseInvestment in AMC mon shares.................................... 480,000Cash .................