How are transfers between portfolios (i.e. from trading to available-for-sale) accounted for?
A) Transfers between portfolios are accounted for at fair value on the date of the transfer.
B) Transfers between portfolios are not allowed under U.S. GAAP.
C) Transfers between portfolios are accounted for based on the initial cost of the investment.
D) Transfers between portfolios are accounted for based on the most recently reported fair value of the investments.
Answer: A
You might also like to view...
What is a noncontrolling interest and what does it represent in the income statement?
What will be an ideal response?
On January 1, 2020, Parent Company acquired 100% of the common stock of Subsidiary Company in a stock exchange
On this date Subsidiary had total owners' equity of $550,000 and book value approximated fair value. During 2020 and 2021, Parent has accounted for its investment in Subsidiary using the simple equity method. On January 1, 2021, Parent held merchandise acquired from Subsidiary for $75,000 . During 2021, Subsidiary sold merchandise to Parent for $100,000, of which $25,000 is held by Parent on December 31, 2021 . Subsidiary's usual gross profit on affiliated sales is 50%. On December 31, 2020, Parent sold to Subsidiary some equipment with a cost of $75,000 and a book value of $30,000 . The sales price was $40,000 . Subsidiary is depreciating the equipment over a 5-year life, assuming no salvage value and using the straight-line method. Parent and Subsidiary qualify as an affiliated group for tax purposes and thus will file a consolidated tax return. Assume a 30% corporate income tax rate. Required: Complete the Figure 6-10 worksheet for consolidated financial statements for the year ended December 31, 2021. Figure 6-10 Trial Balance Eliminations and Parent Sub. Adjustments Account Titles Company Company Debit Credit Inventory, December 31 100,000 60,000 Other Current Assets 374,000 520,000 Investment in Sub. Company 740,000 Land 240,000 120,000 Buildings and Equipment 515,000 380,000 Accumulated Depreciation (120,000) (140,000) Current Liabilities (150,000) (50,000) Long-Term Liabilities (200,000) (150,000) Common Stock – P Co. (300,000) Other Paid-in Capital – P Co. (300,000) Retained Earnings – P Co. (679,000) Common Stock – S Co. (50,000) Other Paid-in Capital – S Co. (200,000) Retained Earnings – S Co. (350,000) Net Sales (600,000) (500,000) Cost of Goods Sold 360,000 200,000 Operating Expenses 120,000 150,000 Subsidiary Income (150,000) Dividends Declared – P Co. 50,000 Dividends Declared – S Co. 10,000 0 0 Consol. Control. Consol. Income Retained Balance Account Titles Statement NCI Earnings Sheet Inventory, December 31 Other Current Assets Investment in Sub. Company Land Buildings and Equipment Accumulated Depreciation Current Liabilities Long-Term Liabilities Common Stock – P Co. Other Paid-in Capital – P Co. Retained Earnings – P Co. Common Stock – S Co. Other Paid-in Capital – S Co. Retained Earnings – S Co. Net Sales Cost of Goods Sold Operating Expenses Subsidiary Income Dividends Declared – P Co. Dividends Declared – S Co.