# ok it's bothering me - trading securities

say a company bought 500 shares of ABC @ 50 in January 2000 and classified it as trading securities. Jan 2002 the stock is at 55. in june 2002, they sell the 500 shares @ 52. What is the realized G/L?

I think… at the end of 2001 they would have shown a gain…or sometime between then so in 2002…there would be a loss of \$3 (\$52-55) for a total loss of \$1500 realized g/l

2 x 500

you calculate it from cost

I think for realized gain, you always compare with original cost. So it should be 1000. For unrealized gain, you have to calculate MVA for each year(based on original cost too here). Then change of MVA is unrealized gain.

does the fact that they are being carried at FMV on the balance sheet play into this…that is why I put the loss of \$3/share

slash, that’s what i thought too, but look at the “available for sale” thread about a few threads down…

If you hold the stock, unrealized gain in -3 * 500. Since you sold the stock, your realized gain in 1000, unrealized gain is -5 * 500 comparing to last year. You treat MVA as zero when sold stock according one of problem I did in Schweser.

I thought we would have an unrealized gain (change in MVA) as of 12-31-02 of 2500 and then a realized loss of 1500 at 6-02 for a total loss of 1000.

i dunno. does it have anything to do with the securities being marked to market?

No. You only adjust for unrealized gain because you calculate change of MVA. But for realized gain, you use original cost only. I take a quick look at CFAI. I see nothing wrong there. 30 * (-20) = 600 realized loss + 140 dividend you get (-460).

yeah, i don’t have answer… i’ve been using original cost this whole time and getting the questions right. i’ll have to look into it… if anyone has a definite answer, please post

now look at the footnotes on p 16. they take the loss on sale for the trading securities as 30 x (60-70) = -300 that’s what threw me off too.

goes to eleven Wrote: ------------------------------------------------------- > I thought we would have an unrealized gain (change > in MVA) as of 12-31-02 of 2500 and then a realized > loss of 1500 at 6-02 for a total loss of 1000. I think date is all messed up. I can explain this better if you give me a good example.

yeah, my example sucked, but check out that page 16 in the fsa text. i’m with you. i’ve been doing it that way the whole time, but i can’t explain that footnote

Ok. That is interesting. I think it is probably just different way of calculating. I used Schweser to learn this. I think end result is same. MVA is zero in 20X2. So unrealized gain in 1000. realized loss -600, got the same answer 400. I see your point now. The result is same, but realized gain and unrealized gain is different. I hope this is not a major blunder by Schweser.

yeah, me too. i’m going to keep doing it the way i’ve been. sorry for the confusion, but it threw me off.

I take another look. The way CFAI calculate realized loss for equity method is totally interesting. I will definitely missed +5 part.

disptra Wrote: ------------------------------------------------------- > Ok. That is interesting. I think it is probably > just different way of calculating. I used Schweser > to learn this. I think end result is same. > MVA is zero in 20X2. So unrealized gain in 1000. > realized loss -600, got the same answer 400. > > I see your point now. The result is same, but > realized gain and unrealized gain is different. > I hope this is not a major blunder by Schweser. and what happened to the 140 total dividend?

i guess they put it in a different section. this sh*t is just getting me more confused. i’m keeping it the way i had it… geez.