Question

A government held the securities shown in the following table in one of its investment portfolios. All the securities are either stocks or bonds that mature in more than one year.
1. Ignoring dividends and interest, how much gain or loss should the government recognize during the year?
2. What was the government’s ‘‘realized’’ gain or loss (i.e., sales proceeds less cost) for the year? Which gain or loss—the amount that would have to be reported on the financial statements as computed in Part (1), or the realized gain or loss—would be more indicative of the change in resources available for future expenditure?
3. Suppose that Security B is a long-term bond that the government intends to hold to maturity. What is the most probable reason for the decline in fair value during the year? In what sense is the reported loss indicative of an economicloss?


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  • CreatedAugust 13, 2014
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