Collin Zucs, CFO of Travel United, Inc., invested some of the firm's excess cash in the...

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Accounting

Collin Zucs, CFO of Travel United, Inc., invested some of thefirm's excess cash in the common shares of what he thought werethree undervalued securities. At year-end, he reviewed how theportfolio of securities had done.

Security Name
Cost Basis Market Value
at Year-End
Classification
Microsoft Corporation $100,000 $134,200 Trading security
Pfizer, Inc. 75,000 80,300 Trading security
Boeing, Inc. 50,000 52,800 Available-for-sale security
$225,000 $267,300
Required
1. Calculate the value that would be assigned to the portfolioof securities on Travel United's balance sheet at year-end.
$Answer
2. Calculate the income statement effect of the portfolio ofsecurities at year-end.
$Answer Answer
3. Calculate the income statement effect of the portfolio ofsecurities at year-end assuming all securities are classified asavailable-for-sale.
$Answer
4. Are the company's reported earnings impacted by whether theportfolio of securities are classified as trading versusavailable-for-sale?
Answer
Will the company's income taxes be impacted?

Security Name	Cost Basis	Market Value at Year-End	Classification
Microsoft Corporation	$100,000	$134,200	Trading security
Pfizer, Inc.	75,000	80,300	Trading security
Boeing, Inc.	50,000	52,800	Available-for-sale security
	$225,000	$267,300

Answer & Explanation Solved by verified expert

4.3 Ratings (828 Votes)

1 267300 Trading and available for sale securities are valued at their fair values at yearend and hence the value assigned to the portfolio would be the fair value which is 267300 2 39500 Unrealized Gain Security Name Cost Market Value Unrealized See Answer

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Transcribed Image Text

Collin Zucs, CFO of Travel United, Inc., invested some of thefirm's excess cash in the common shares of what he thought werethree undervalued securities. At year-end, he reviewed how theportfolio of securities had done.Security NameCost BasisMarket Valueat Year-EndClassificationMicrosoft Corporation$100,000$134,200Trading securityPfizer, Inc.75,00080,300Trading securityBoeing, Inc.50,00052,800Available-for-sale security$225,000$267,300Required1. Calculate the value that would be assigned to the portfolioof securities on Travel United's balance sheet at year-end.$Answer2. Calculate the income statement effect of the portfolio ofsecurities at year-end.$Answer Answer3. Calculate the income statement effect of the portfolio ofsecurities at year-end assuming all securities are classified asavailable-for-sale.$Answer4. Are the company's reported earnings impacted by whether theportfolio of securities are classified as trading versusavailable-for-sale?AnswerWill the company's income taxes be impacted?