Financial Accounting: An Integrated Statements Approach, 2nd Edition

To illustrate, assume that an investment in Drey Inc. stock has a carrying amount

of $15,700 when it is sold on March 1. If the proceeds from the sale of the stock are

$17,500, the entry to record the transaction is as follows:

Once the security is sold, any unrealized gains or losses associated with that secu-

rity will no longer be included in comprehensive income at the end of the period.

This prevents gains or losses from being double-counted, once as unrealized, then

again as realized.

Investment Reporting

To illustrate investment disclosures, eBay Inc.reported the following current and

long-term investments on a recent balance sheet:

Current assets

Short-term investments $682,004

Noncurrent assets

Long-term investments $1,266,289

eBay’s notes included the following additional disclosure:

Short- and long-term investments, which include marketable equity securities, mu-

nicipal, government and corporate bonds, are classified as available-for-sale and re-

ported at fair value using the specific identification method. Realized gains and losses

are included in earnings and were immaterial in all periods presented. Unrealized gains

548 Chapter 12 Special Income and Investment Reporting Issues

Investment

in Brock

Corporation

stock

Investment

in Brock

Corporation

stock

$24,000

net increase

40% of

Brock’s net

income

40% of

Brock’s cash

dividends

$350,000

(40% interest)

$374,000

(40% interest)

$42,000

$18,000

JAN

2

DEC

31

}

INVESTMENT AND DIVIDENDS

Mar. 1 Cash 17,500

Investment in Drey Inc. Stock 15,700

Gain on Sale of Investments 1,800

SCF BS IS

Ic AcT SEc Rc