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On January 2, 2019, All Good Company purchased 5,000 shares of the stock of Big Bad Company, and DID NOT obtain significant influence
On January 2, 2019, All Good Company purchased 5,000 shares of the stock of Big Bad Company, and DID NOT obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $13 per share, and represents a 10% ownership stake. Big Bad Company made $200,000 of net income in 2019, and paid dividends to All Good Company of $7,500 on December 15, 2019. On December 31, 2019, Big Bad Company's stock was trading on the open market for $13.50 per share at the end of the year. Use this information to determine the unrealized gain or loss on the investment that should be reported at year end by All Good Company. If it is a loss, enter as a negative number. Round to nearest whole dollar.
Expert Solution
Computation of the unrealized gain or loss on the investment:-
Unrealized gain = Shares value at the year-end - Purchase price paid to acquire shares
= (5,000 * $13.50) - (5,000 * $13)
= $67,500 - $65,000
= $2,500
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