Question
On June 15, 2020, Brainiac Company purchased 8 shares of Lovely Company for $6 per share. The investment represented less than 20% of the shares
On June 15, 2020, Brainiac Company purchased 8 shares of Lovely Company for $6 per share. The investment represented less than 20% of the shares outstanding so it was a passive investment. Brainiac held the investment for the remainder of 2020, and at December 31 the market value was $4 per share. During 2021, Brainiac sold 3 shares of Lovely for $7 each and at the end of 2021, the market value of the remaining 5 shares was $9 each.
What was the gain or loss on Brainiac's income statement for 2021? Indicate how much of the gain or loss is realized and how much is unrealized.
Select one:
a. $9 realized gain and $25 unrealized gain
b. $3 realized gain and $15 unrealized gain
c. $3 realized gain and $25 unrealized gain
d. $9 realized gain and $15 unrealized gain
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started