Reporting Holding Gains for Securities Available for Sale and Trading Securities

Reporting Holding Gains for Securities Available for Sale and Trading Securities

On June 30th, 2009, MetroMedia, Inc., purchased 10,000 shares of Mitek stock for $20 per share. The following information pertains to the price per share of
Mitek stock:

12/31/2009 – $24

12/31/2009 – $31

Requirement 1:

Assume that management intends to hold the stock as securies available for sale for three years or more. Show how the stock investment and its holding gains
would be reported at the end of 2010 and 2009 on the classified balace sheet and income statement. (Leave no cells blank – be certain to enter “0” wherever
required.)

Balance Sheet 2010 2009

Noncurrent Asset

Stock holders’ Equity

Income Statement 2010 2009

Investment Income

Requirement 2:

Assume that management purchased the stock as trading securities. Show how the investment and holding gains would be reported at the end of 2010 and 2009 on
the classified balace sheet and income statement. (Leave no cells blank – be certain to enter “0” wherever required.)

Balance Sheet 2010 2009

Current Asset

Stock holders’ Equity

Income Statement 2010 2009

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