Intermediate Accouting 2: ACCT 311

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The following information is available for an enterprise’s security investments as of December 31, 2008:

 

 

 

Valuation

 

Market 

 

 

 

Original

Allowance

 

Value 

 

 

Investment

Cost

12/31/2007

Classification

12/31/2008

 

 

Costco stock

 $ 40,000

 $3,000 dr.

SAS

 $   39,000

 

 

Wal-Mart bonds

 $ 30,000

$ 2,000 cr.

TS

 $   32,000

 

 

 

 

 

 

 

 

 

The Wal-Mart bonds were purchased at par value.

 

 

 

SAS = securities available-for-sale

 

 

 

 

TS = trading securities

 

 

 

 

What is the 2008 holding gain or loss recognized in 2008 earnings and directly to stockholders’ equity?

a.

Earnings: $4,000 loss Stockholders’ Equity: $4,000 loss

b.

Earnings: $4,000 gain Stockholders’ Equity: $4,000 gain

c.

Earnings: $4,000 loss Stockholders’ Equity: $4,000 gain

d.

Earnings: $4,000 gain Stockholders’ Equity: $4,000 loss

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