Central Investments bought 4,000 shares of Benet Company common stock on January 1, 20X1, for $20,000, and
Question:
Central Investments bought 4,000 shares of Benet Company common stock on January 1, 20X1, for $20,000, and 4,000 shares of Roy Company common on July 1, 20X1, for $24,000. Benet declared dividends on December 31, 20X1of $3,000. At the end of 20X1, the fair value of Roy was $30,000 and the fair value of Benet was $28,000. At the end of 20X2, the fair value of Roy was $32,000 and the fair value of Benet was $24,000. These investments are reported in the long-term asset section of Central’s balance sheet. Central owns 8% of Benet Company and 12% of Roy Company.
Assume that the Roy Company stock was sold during 20X3 for $31,000. The proper accounting recognition at the date of sale was
an unrealized loss $1,000.
a realized gain of $7,000.
a realized gain of $6,000.
a realized loss of $1,000.
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker