1. On March 5, Maxwell Corporation purchased seventy shares of Tyrone Company for $30 per share, planning to hold the investment for a short time. On June 30, Maxwell prepares its quarterly financial statements. On that date, Tyrone is selling for $32 per share. What is the unrealized gain Maxwell will report and where should it be reported?
a. $140 unrealized gain, owners’ equity section of balance sheet
b. $140 unrealized gain, income statement
c. $2,240 unrealized gain, income statement
d. $2,100 unrealized gain, owners’ equity section of balance sheet
2. Which of the following is not a reason investments in trading securities are shown at their fair value on the balance sheet?
a. Fair values of publicly traded securities are readily available.
b. Fair value is considered relevant information to financial statement users.
c. Fair value is an objective amount determined by the market.
d. Fair value is easier to determine than historical cost.