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Rose Company had no short-term investments prior to this year. It had the following transactions this year involving short-term stock investments with insignificant influence.

Apr. 16 Purchased 3,500 shares of Gem Co. stock at $24 per share.
July 7 Purchased 2,000 shares of PepsiCo stock at $49 per share.
20 Purchased 1,000 shares of Xerox stock at $16 per share.
Aug. 15 Received a $1.00 per share cash dividend on the Gem Co. stock.
28 Sold 2,000 shares of Gem Co. stock at $30 per share.
Oct. 1 Received a $2.50 per share cash dividend on the PepsiCo shares.
Dec.15 Received a $1.00 per share cash dividend on the remaining Gem Co. shares.
31 Received a $1.50 per share cash dividend on the PepsiCo shares.

1. Purchased 3,500 shares of Gem Co. stock at $24 per share.
2. Purchased 2,000 shares of PepsiCo stock at $49 per share.
3. Purchased 1,000 shares of Xerox stock at $16 per share.
4. Received a $1.00 per share cash dividend on the Gem Co. stock.
5. Sold 2,000 shares of Gem Co. stock at $30 per share.
6. Received a $2.50 per share cash dividend on the PepsiCo shares.
7. Received a $1.00 per share cash dividend on the remaining Gem Co. shares.
8. Received a $1.50 per share cash dividend on the PepsiCo shares.

Prepare a table to compare the year-end cost and fair values of Rose's short-term stock investments. The year-end fair values per share are Gem Co., $26; PepsiCo, $46; and Xerox, $13.

Answer :

Answer:

The table gives  a loss of $6000

Explanation:

Companies volume    cost  cost val.  fair value  fair value val. gain/(loss)

Gem Co.      1500        $24  $36000    $26           $39000           $3000

Pepsi Co.    2000        $49  $98000   $46            $92000          ($6000)

Xerox           1000        $16    $1600      $13            $13000           ($3000)

                                                       fair value loss                            ($6000)

Overall the fair value measurement of the stocks gives $6,000 fair value loss,which is unrealized yet, the realized gains or losses would be determined upon disposal of the holdings

However, the fact that an investment is sold less than its cost does not necessarily mean loss was realized, because the overall return on stock holdings would consider both dividends yield as well as capital gains yield(changes in prices)

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