Financial Statement Effect of Equity Securities Presented below are three unrelated situations involving equity securities. Situation 1

Question:

Financial Statement Effect of Equity Securities Presented below are three unrelated situations involving equity securities.

Situation 1

An equity security, whose market value is currently less than cost, is classified as available-for-sale but is to be reclassified as trading.

Situation 2

A noncurrent portfolio with an aggregate market value in excess of cost includes one particular security whose market value has declined to less than one-half of the original cost. The decline in value is considered to be other than temporary.

Situation 3

The portfolio of trading securities has a cost in excess of fair value of $13,500. The available-for-sale portfolio has a fair value in excess of cost of $28,600.

What is the effect upon carrying value and earnings for each of the situations above?

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...