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Answer :
The amount that Jewel Company should report in the current-year income statement from its investment in Marcelo Corporation is an Unrealized Gain-Income of $2,940.
Let's break down the events and calculations step by step:
1. Initial Purchase:
On February 15, Jewel Company buys 6,000 shares of Marcelo Corporation at $2,873 per share. The total cost of the investment is 6,000 shares * $2,873 = $17,238,000.
2. Dividend Received:
On April 30, Jewel Company receives a dividend of $125 per share. As they own 6,000 shares, the total dividend received is 6,000 shares * $125 = $750,000.
3. Unrealized Gain/Loss:
The fair value of the remaining shares at year-end is given as $29.71 per share. Since Jewel Company sold half of the shares, they have 6,000 / 2 = 3,000 shares remaining.
Total fair value of remaining shares = 3,000 shares * $29.71 = $89,130
Total cost of remaining shares = 3,000 shares * $2,873 = $8,619,000
Unrealized gain = Total fair value - Total cost = $89,130 - $8,619,000 = $2,940, which is an Unrealized Gain-Income.
Jewel Company should report an Unrealized Gain-Income of $2,940 in the current-year income statement from its investment in Marcelo Corporation. This represents the change in the value of the remaining shares held by the company at year-end compared to their initial cost. The dividend received should not be included in the income statement as it represents a distribution of earnings to the shareholders and is not considered income.
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