Problem:
The XYZ's available-for-sale and held-to-maturity securities were included in the following captions in our consolidated balance sheets (in millions):
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December 31, 2011
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December 31, 2011
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December 31, 2010
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December 31, 2010
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|
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Available-for-Sale Securities
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Held-to-Maturity Securities
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Available-for-Sale Securities
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Held-to-Maturity Securities
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|
Cash and equivalents
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$ --
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$ 112
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$ --
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$ 110
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Marketable securities
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5
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1
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5
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1
|
|
Other investments, principally bottling companies
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986
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--
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471
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--
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Other assets
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410
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--
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9
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--
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|
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$1,401
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$ 113
|
$ 485
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$ 111
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Required:
a. Explain the difference between "Held-to-maturity securities," "Available-for-sale securities," and "Trading securities."
b. What amount does XYZ Company report for available-for-sale securities on its balance sheets at December 31, 2011, and 2010? How are these values measured?
c. What are the net unrealized gains (losses) on available-for-sale securities for 2011 and 2010?
d. How did these unrealized gains (losses) on available-for-sale securities affect the company's reported income in 2011?
e. What is the difference between realized and unrealized gains and losses? Are realized gains and losses treated differently in the income statement than unrealized gains and losses?
Summary of problem:
This question basically belongs to Finance as well as it deals with different questions such as the difference between various securities, measuring the values of securities, unrealized gains and the difference between unrealized gains and losses. These questions have been answered in detail in the solution.