At December 31 2017 the trading securities for Saddle Inc. are as follows: $32,00030,000\begin{array} { c c c } \underline{\text { Security }} & \underline{ \text { Cost } }& \underline{ \text { Fair Value 12/31/17 }} \\\text { A } & \$ 90,000 & \$ 94,000 \\\text { B } & 150,000 & 141,000 \\\text { C } & 32,000 & 30,000\end{array}$ Saddle should report the following amount related to the securities in its 2017 income statement:

A) $4000 gain
B) $7000 realized loss.
C) $7000 unrealized loss.
D) $11000 unrealized loss.

Question

At December 31 2017 the trading securities for Saddle Inc. are as follows:

32,00030,000\begin{array} { c c c } \underline{\text { Security }} & \underline{ \text { Cost } }& \underline{ \text { Fair Value 12/31/17 }} \\\text { A } & \$ 90,000 & \$ 94,000 \\\text { B } & 150,000 & 141,000 \\\text { C } & 32,000 & 30,000\end{array}

Saddle should report the following amount related to the securities in its 2017 income statement:

A) $4000 gain
B) $7000 realized loss.
C) $7000 unrealized loss.
D) $11000 unrealized loss.

kaash money · Accepted Answer

Final Answer : C, Explanation :  From the given information, we can see that the fair value of the trading securities portfolio at the end of 2017 is $93,000 (i.e., the sum of the fair values of the individual securities in the portfolio). However, Saddle Inc. had purchased these securities for a total cost of $100,000. This means that there is an unrealized loss of $7,000 ($100,000 - $93,000) on these securities as of December 31, 2017. This loss is unrealized because Saddle has not yet sold these securities, so it has not yet realized the loss.Therefore, the correct answer is C) $7000 unrealized loss.

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