Tim Propp, CFO of Thunderbird, Inc., invested some of the firm’s excess cash in the common shares of what he thought were three undervalued securities. At year-end he reviewed how the portfolio of securities had done.

Required
1. Calculate the value that would be assigned to the portfolio of securities on Thunderbird’s balance sheet at year-end.

2. Calculate the income statement effect of the portfolio of securities at year-end.
3. Calculate the income statement effect of the portfolio of securities at year-end assuming all securities are classified as available-for-sale.

4. Are the company’s reported earnings impacted by whether the portfolio of securities are classified as trading versus available-for-sale? Will the company’s share price be impacted by the particular classification adopted? Will the company’s income taxes be impacted?

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Security Name Microsoft Corporation.. Pfizer, Inc... Boeing, Inc. Cost Basis Fair Value at Year-End Classification $100,000 $122,000 Trading security 75,000 73,000 Trading security 50,000 48,000 Available-for-sale security $225,000 $243,000