Analysis: Marketable Securities
The Amber Corporation purchased three different stocks during the year as follows:
• 100 shares of Fancy Corporation, cost $23 per share
• 250 shares of Traylor Corporation, cost $15 per share
• 180 shares of Sensor Corporation, cost $7 per share
Amber Corporation intends to sell these soon when its cash flow gets low. On the balance sheet date, these securities had a market price as follows:
|
1. Fancy Corporation: |
$24 per share |
|
2. Traylor Corporation: |
$12 per share |
|
3. Sensor Corporation: |
$9 per share |
Required
a. Assuming that these securities are considered available for sale, what would be the effect on the financial statements of holding these securities?
b. Assuming that these securities are considered trading securities, what would be the effect on the financial statements?
c. What if, after the balance sheet date, Amber decides to sell Traylor Corporation stock for a market price of $14 per share? What would be the effect on the financial statements if the security is (1) available for sale or (2) trading?