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On December 31, 2020, Patel Company purchased debt securities as trading securities. Pertinent data are as follows: Security Cost Fair Value at 12/31/21 A $132,000 $119,000 B 172,000 186,000 C 288,000 263,000 On December 31, 2021, Patel transferred its investment in security C from trading to available-for-sale because Patel intends to retain security C as a long-term investment. What total amount of gain or loss on its securities should be included in Patel's income statement for the year ended December 31, 2021

Respuesta :

Answer:

the loss on the securities that should be included in the income statement is -$24,000

Explanation:

The computation of the total amount or gain or loss that included in the income statement is shown below;

Security     Fair value           cost         Gain or loss

A                 $119,000           $132,000  ($13,000)

B                  $186,000          $172,000  $14,000

C                   $263,000        $288,000  ($25,000)

Net loss                                                      ($24,000)

Hence, the loss on the securities that should be included in the income statement is -$24,000

chilljain33

The total amount of loss that will be included in Patel's income statement for the year ended Dec 31st 2021 will be $24000. This loss will be transferred to the P and L accounts of Patel.

Patel has incurred this loss on trading of investments like A, B and C as the differences between the cost of purchase and realizable value is in a deficit of  total $24000 after calculations.

  • Patel Co. standings on investments in A stood as 132000 cost price and realizable value of 119000 which leads to a loss of 13000 on investments realized after sale. So, A equals to (13000)

  • Whereas there is a gain of 14000 on investments in B as the cost of purchase was 172000 and realized value was 186000 after the sale of investments in B. So, B equals 14000.

  • However, investments in C had a variably higher losses as the cost of purchase of C was 288000 and it was realizable at a value of 263000 leading to loss of 25000. So, C equals to (25000).

Hence after adding the values of A+B+C i.e., (-13000)+ 14000 + (-25000) we can conclude that the total loss on sale of securities to be included in Patel Co. will be $24000.

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