Among the various responsibilities of the Chief Financial Officer (CFO) of the Amphlett Corporation was the management and oversight of the firm’s cash reserves.

During the year, the CFO had invested some of the firm’s excess cash in what she thought were three undervalued stocks. All of the securities were classified as available-for-sale. At year-end, she reviewed how the portfolio of investments had done.

Required
1. Calculate the value that would be assigned to the portfolio of marketable equity securities on the balance sheet of the Amphlett Corporation at year-end under each of the following approaches:
a. Cost

b. Lower-of-cost-or-market

c. Fair value 

2. How will the disclosure on the year-end balance sheet change if the entire portfolio is classified as “trading securities” versus “available-for-sale securities”?

Transcribed Image Text:

Investment Bristol-Myers Squibb, Inc. Titanium Metals, Corp. Zila, Inc. Cost Basis 50,000 Fair Value at Year-End $ 42,000 55,000 50,000 50,000 80,000 $150,000 $177,000