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QUESTION
Early in the year, Fabulous Recreation, a leading manufacturer of quality recreational equipment, put some idle cash to work by investing in
Total
$80,000
$97,000
Because Fabulous prepares financial statement only at year-end, no gains or losses have been recognized for any of the securities.
President Martinoff is considering five possible means for disposing of the marketable securities:
- Sell for cash
- Use to satisfy liabilities
- Distribute to stockholders as a dividend
- Use to pay executive bonuses
- Donate to a charity
He has told the controller that his decision about which course of action to take will depend in part on how much gain or loss will be recognized as a result of the disposal option he chooses.
Required:
- How much gain or loss should Fabulous recognized under each of the five options for disposing of the assets?
- Should the amount depend on the means of disposal?
