Iron Company incurred the following transactions relating
Question and Solution
Iron Company incurred the following transactions relating to the common stock of Bronze Company: July 14, 2010 Purchased 10,000 shares at $35 per share. Sept. 4, 2011 Sold 2,500 shares at $40 per share. Aug. 24, 2012 Sold 1,500 shares at $33 per share. The end-of-year market prices for the shares were as follows: Dec. 31, 2010 $32 per share Dec. 31, 2011 $45 per share Dec. 31, 2012 $28 per share Iron classifies the Bronze stock as trading securities. Required: 1. Determine the amount of (a) Realized gain or loss and (b) Unrealized gain or loss to be reported on the income statement each year relating to the Bronze stock. 2. How would your answer to part (1) change if the securities were classified as available-for- sale? Explain.