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20 September, 21:03

On its December 31, 2020, balance sheet, Pharoah Company reported its investment in equity securities, which had cost $640000, at fair value of $592000. At December 31, 2021, the fair value of the securities was $621000. What should Pharoah report on its 2021 income statement as a result of the increase in fair value of the investments in 2021?

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  1. 20 September, 22:53
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    Pharoah should report $ 29,000 as unrealised gain on its 2021 income statement.

    Explanation:

    The Investments are valued at lower of cost or fair value.

    On December 31,2020 investments were reported to bevalued at $ 592,000. According to the data On December 31, 2021 the fair value has raised to $ 621,000.

    The Investments are valued at lower of cost or fair value.

    Therefore, to calculate what should Pharoah report on its 2021 income statement as a result of the increase in fair value of the investments in 2021, we have the following calculation:

    $621,000-$592,000=$29,000

    Hence, Pharoah should report $ 29,000 as unrealised gain on its 2021 income statement.
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