Mock exam 1 #15 and #17

#15: Mark-to-market returns include interest, divs, realized and unrealized G/L’s. CFAI says that De Vaca does not have a market value, so is accounted for under the cost method, and thus it’s not possible to calculate a mark-to-market return for it. But De Vaca paid a dividend of $2, so while you can’t calculate an unrealized G/L, shouldn’t you still include the dividend in the total mark-to-market return? #17: If you have to classify De Soto as avail-for-sale rather than equity… CFAI says that BV could decrease because equity will not be increased by ACI’s share of De Sota’s income (less dividends). But wasn’t De Sota’s current market value higher than what ACI was carrying it at (Cost + share of income - dividends)? And if moved to avail-for-sale, wouldn’t that increase in market value flow through OCI and therefore equity, so wouldn’t BV actually increase?? Thanks

15: It specifically asks for the returns on marketable securities. De Vaca isn’t marketable because there’s no market for it. 17: Any takers?

I didn’t remember it specifically saying marketable securities; thought it just said calculate for securities that fall under SFAS 115, which would include De Vaca. But if it did, I guess that explains it. Thanks. anyone have any idea on #17?

#15 : specifically asks for the returns on marketable securities #17 : I think, no, because when you sell that security you have to use the original COST and realize the gain. ?? not sure ?? I got both wrong. :frowning: