S& l financial buys and sells securities which it classifies as available-for-sale. on december 27, 2018, s& l purchased coca-cola bonds at par for $890,000 and sold the bonds on january 3, 2019, for $897,000. at december 31, the bonds had a fair value of $887,500, and s& l has the intent and ability to hold the investment until fair value recovers. what pretax amounts did s& l include in its 2018 and 2019 net income as a result of this investment?

The pretax amounts did S&L include in its 2018 and 2019 net income as a result of this investment is $2,500 loss and $9,500 profit.

Explanation:

The computation of the pretax amounts for each year is shown below:

For the year 2018

Pretax amount = Purchase value of coca-cola bonds - fair value

                         = $890,000  - $887,500

                         = $2,500      

The $2,500 would be loss as fair value is less than its purchase price

For year 2019

Pretax amount = sale value of coca-cola bonds - fair value

                         = $897,000  - $887,500

                         = $9,500      

The $9,500 would be profit as sale value is more than its fair value.

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