Question

Glacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31:

Year 1
Jan. 18.	Purchased 8,300 shares of Malmo Inc. as an available-for-sale security at $42 per share, including the brokerage commission.
July 22.	A cash dividend of $0.55 per share was received on the Malmo stock.
Oct. 5.	Sold 3,700 shares of Malmo Inc. stock at $46 per share, less a brokerage commission of $45.
Dec. 18.	Received a regular cash dividend of $0.55 per share on Malmo Inc. stock.
Dec. 31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $40 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment.
Year 2
Jan. 25.	Purchased an influential interest in Helsi Co. for $610,000 by purchasing 49,000 shares directly from the estate of the founder of Helsi Co. There are 140,000 shares of Helsi Co. stock outstanding.
July 16.	Received a cash dividend of $0.65 per share on Malmo Inc. stock.
Dec. 16.	Received a cash dividend of $0.65 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock.
Dec. 31	Received $18,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $74,000 in Year 2. Glacier Products uses the equity method of accounting for its investment in Helsi Co.
Dec. 31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $45 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $40 to $45 per share.

Required:

1. Journalize the entries to record the preceding transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. In your computations, round per share amounts to two decimal places.

2. Prepare the investment-related asset and stockholders’ equity balance sheet presentation for Glacier Products Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is $445,000.

Answer 1

Journal entries
Date	Account Title and Explanation	Debit	Credit
2016
18-Jan	Available-for-sale Investments	$348,600
	Cash (8300 x $42)		$348,600
	(To record purchase of shares)
22-Jul	Cash (8300 x $0.55)	$4,565
	Dividend revenue		$4,565
	(To record cash dividend received)
05-Oct	Cash [(3700 x $46) - $45]	$170,155
	Realized Gain on sale of investments		$14,160
	Available-for-sale Investment (3700 x $42)		$155,400
	(To record sale of investment)
Dec-18	Cash (4600 x $0.55)	$2,530
	Dividend revenue		$2,530
	(To record cash dividend received)
Dec-31	Unrealized gain on Available-for-sale Investments	$9,200
	Valuation allowance for available for sale investment		$9,200
	[(8300-3700) x ($42-$40)]
	(To record available-for-sale investments at fair value)
2017
25-Jan	Investment in Helsi Co.	$610,000
	Cash		$610,000
	(To record purchase of49000 share)
16-Jul	Cash (4600 x $0.55)	$2,530
	Dividend revenue		$2,530
	(To record cash dividend received from Malmo Inc.)
16-Dec	Cash (4600 x $0.80)	$3,680
	Dividend revenue		$3,680
	(To record cash dividend and extra dividend received from Malmo Inc.)
Dec-31	Cash	$18,000
	Investment in Helsi Co.		$18,000
	(To record cash dividend received from Helsi Co.)
Dec-31	Investment in Helsi Co.	$25,900
	Equity income in Helsi Co. (74000 x 49000/140000)		$25,900
	(To record share in net income of Imboden Inc.)
Dec-31	Valuation allowance for available for sale investment	$23,000
	Unrealized gain on Available-for-sale Investments		$23,000
	[(4600*$5)
	(To record available-for-sale investments at fair value)

Glacier Products, Inc.
Balance Sheet (selected items)
December 31, Year 2
Current Assets;
Available for sale investment (4600 * $40)	$184,000
Add: Valuation allowance for available for sale Investments ($23000 - $9200)	$13,800
Available for sale investment		$197,800
Investments;
Investment in Helsi Co. Stock ($610000 + $25900 – $18000)		$617,900.00
Shareholders’ equity;
Retained earnings	$445,000
Unrealized gain on available for sale investment ($23000 - $9200)	$13,800	$458,800