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Question
Ralmond Industries owns an investment that experienced a decline during 2012 that has been judged to be "other than temporary". The investment is held in Ralmond's available-for-sale debt portfolio, and Ralmond does not expect to sell the security and it is unlikely that Almond will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. It was purchased in March 2011 at a cost of $460,000. At the end of 2011, the fair value of the investment was $520,000 and its amortized cost basis was $454,000. At the end of 2012, the fair value of the investment is $410,000 and its amortized cost is $448,000. At the end of 2012, the present value of expected cash flows associated with the security discounted at the effective interest rate implicit when it was originally acquired is $432,000. What amount of loss will Ralmond Industries report on its income statement for the year ending December 31, 2012 related to this investment?
A. An unrealized loss $16,000.
B. An unrealized loss of $38,000.
C. An unrealized loss of $44,000.
D. An unrealized loss of $22,000.
Answer
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