The Cost and Fair Value of the Trading Securities Held

question 43

Essay

The cost and fair value of the trading securities held by Lindy Company as of December 31 are as follows:
$\begin{array}{|l|r|r|r|l|l|}\hline \text { Name } & \begin{array}{c}\text { Number } \\\text { of } \\\text { Shares }\end{array} & \begin{array}{c}\text { Cost } \\\text { per } \\\text { Share }\end{array} & \begin{array}{c}\text { Fair }\\\text { Value } \\\text { per } \\\text { Share }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} & \begin{array}{c}\text { Total } \\\text { Fair } \\\text { Value }\end{array} \\\hline \text { Laurie, Inc. } & 1,200 & \$ 10.50 & \$ 11.05 & & \\\hline \text { Scott Corp. } & 600 & 9.00 & 9.85 & & \\\hline \text { Stephanie Company } & 900 & 4.10 & 4.00 & & \\\hline \text { Timmer Company } & 1,400 & 7.35 & 6.82 & & \\\hline \text { Total } & & & & & \\\hline\end{array}$
a. Complete the table above to find the total cost and fair value for the company's trading securities portfolio.
b. Calculate and record the required December 31 adjustment.
c. Explain how the adjustment from step b is reported on Lindy's financial statements.

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Definitions:

Long Put Positions

An investment strategy where an investor purchases put options betting that the underlying asset will decrease in value.

Dividend Payout Policy

The policy a company follows in deciding how much it will pay out to shareholders in dividends.

Put

A financial option contract giving the owner the right but not the obligation to sell a specified amount of an underlying asset at a set price within a specified time.

Call

An options contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a specified time.