Case 2 Essay
Wednesday, May 29 (at the beginning of class). Also, please be prepared to discuss the case and your solution in class on this date. Refer to the current, relevant accounting guidance to answer the questions on page 3 of the case.
Please be sure to reference the applicable professional guidance listed below. Your discussion should be typed, double-spaced and no more than 3 pages in length. Please prepare your case discussion in memo form (to Jim Beatty) addressing each of the questions.
Applicable Professional Pronouncements: ASC 320-10-35: Investments – Debt and Equity Securities SAB 111: http://www.sec.gov/interps/account/sab111.htm
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(1) Surrey owns additional stock in Wells Fargo that is in a net gain position. The fair value of Surrey’s aggregate investment in Wells Fargo of $8,859 million exceeded cost by approximately $1,003 million or 13%.
To better understand how the position of these five investments changed during the year, the following table presents similar information for these five investments as of December 31, 2009. Anne Surrey did not record impairment for any securities in 2009.
December 31, 2009 Gross Unrealized Loss $ 789 646 231 110 832 Months of Highest Market Continuous Market Price Price Per Share Loss Cost Per Share Per Share During the Year 15 $ 29.65-34.98 $ 27.18 $ 29.57 12 28.02-34.67 22.51 25.35 18 58.06-74.65 48.21 50.26 21 80.64-90.07 78.85 80.53 12 31.43-36.33 26.99 31.38
Issuer Cost Kraft Foods $ 4,330 U.S. Bancorp 2,371 Swiss Re 773 Sanofi-Aventis 1,359 Wells Fargo (1) 3,664
(1) Surrey owns additional stock in Wells Fargo that is in a net gain position. The fair value of Surrey’s aggregate investment in Wells Fargo of $9,021 million exceeded cost by $1,627 million or 22%.
The company acquired the five securities described in the tables above based on management’s belief that the prices paid were below each security’s then intrinsic value. Historically,