Question

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During the first year of operations, Makala Company purchased two available-for-sale investments as follows:

Security	Shares Purchased	Cost
Oceanna Company	700	$29,000
Rockledge, Inc.	1,900	41,000

Assume that as of December 31, Oceanna Company’s stock had a market value of $49 per share and Rockledge, Inc.’s stock had a market value of $20 per share. Makala had 10,000 shares of no par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had a net income of $105,000. No dividends were paid.

	Required:
(a)	Prepare the Current assets section of the balance sheet for the available-for sale securities as of December 31.*
(b)	Prepare the Stockholders’ equity section of the balance sheet as of December 31.* * Refer to the information given and list of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. “Plus” or “Less” will automatically appear if it is required.

Accounts and Amount Descriptions

Available-for-sale investments, at cost

Common stock

Retained earnings

Total stockholders’ equity

Unrealized gain (loss) on available-for-sale investments

Valuation allowance for available-for-sale investments

Prepare the Current assets section of the balance sheet for the available-for sale securities as of December 31. Refer to the information given and list of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. “Plus” or “Less” will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Makala Company

Balance Sheet (selected items)

December 31

1	Assets
2	Current assets:
3
4

Prepare the Stockholders’ equity section of the balance sheet as of December 31. Refer to the information given and list of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Makala Company

Balance Sheet (selected items)

December 31

1	Stockholders’ Equity
2
3
4
5

Answer 1