Describe the Difference in the Calculation of the Realized Gain

question 32

Essay

Describe the difference in the calculation of the realized gain or loss on the sale of an investment when the trading security classification is used relative to use of the available-for-sale classification.

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Definitions:

Common Shares

Equity securities that signify ownership in a corporation and entitle the holder to a vote at shareholders' meetings and to receive dividends.

Preferred Shares

A class of ownership in a corporation that has a higher claim on its assets and earnings than common shares, often paid dividends before common shareholders.

Treasury Shares

Previously outstanding shares repurchased by a corporation that are not canceled or restored to unissued status.

Repurchased Shares

Stocks that have been bought back by the issuing company from shareholders, reducing the amount of outstanding shares on the market.