Presented below are three unrelated situations involving equity investments. Situation 1 A debt investment portfolio, whose fair

Question:

Presented below are three unrelated situations involving equity investments.

Situation 1
A debt investment whose fair value is currently less than cost, is classified as trading but is to be reclassified as held-for-collection.

Situation 2
A debt investment with an aggregate fair value in excess of cost includes one particular debt investment whose fair value has declined to less than one-half of the original cost. The decline in value is considered to be permanent.

Situation 3
The of trading equity investments has a cost in excess of fair value of $13,500. The of non-trading equity investments has a fair value in excess of cost of $28,600.

Instructions
What is the effect upon carrying value and earnings for each of the situations above?

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...