During its first year of operation, Lenton Limited acquired three securities as trading investments. Investment A cost $50,000 and had a year-end fair value of $60,000. Investment B cost $35,000 and had a year-end fair value of $20,000. Investment C cost $26,000 and had a year-end fair value of $24,000. What amount should be reported as an unrealized loss in Lenton's income statement for the first year of operation?
A)$0
B)$7,000
C)$17,000
D)$27,000

Question

Quizplus · Accepted Answer

The unrealized loss is calculated by taking the fair value at year-end and subtracting the cost of the investment. 
For investment A: Unrealized gain = $60,000 - $50,000 = $10,000 
For investment B: Unrealized loss = $20,000 - $35,000 = $(15,000) 
For investment C: Unrealized loss = $24,000 - $26,000 = $(2,000) 
Therefore, the total unrealized loss is $(15,000) + $(2,000) = $(17,000), which is option B.

During Its First Year of Operation, Lenton Limited Acquired Three