15-3.6 Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo...

15-3.6 Balance Sheet Presentation of Available-for-Sale Investments

During Year 1, its first year of operations, Galileo Company purchased two available-for-sale investments as follows:

Security	Shares Purchased	Cost
Hawking Inc.	910		$48,776
Pavlov Co.	2,470		68,913

Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $64 per share and the Pavlov Co. stock had a market value of $50 per share. Galileo Company had net income of $377,800 and paid no dividends for the year ending December 31, Year 1. All of the available-for-sale investments are classified as current assets.

a. Prepare the Current Assets section of the balance sheet presentation for the available-for-sale investments.

Galileo Company
Balance Sheet (selected items)
December 31, Year 1
Assets
Current Assets:
Available-for-Sale Investments, at Cost	$
Plus Unrealized Gain (Loss) on Available-for-Sale Investments		$

b. Prepare the Stockholders' Equity section of the balance sheet to reflect the earnings and unrealized gain (loss) for the available-for-sale investments.

Galileo Company
Balance Sheet (selected Stockholders' Equity items)
December 31, Year 1
Stockholders' Equity
Retained Earnings	$
Unrealized Gain (Loss) on Available-for-Sale Investments

Solutions

Expert Solution

Galileo Company
Balance Sheet (Selected items)
December 31, Year 1
Assets
Current assets:
Available-for-Sale Investments, at Cost [Refer working note 1]	$117,689
Plus: Unrealized Gain (Loss) on Available-for-Sale Investments [Refer working note 3]	$64,051

Galileo Company
Balance Sheet (selected Stockholders' Equity items)
December 31, Year 1
Stockholders' Equity
Retained Earnings	$377,800
Unrealized Gain (Loss) on Available-for-Sale Investments [Refer working note 3	$64,051

Working note 1 - Calculation of total cost:
	Cost
Hawking Inc. (a)	$48,776
Pavlov Co. (b)	68,913
Total cost (a + b)	$117,689

Working note 2 - Calculation of toal fair value:
	Fair value
Hawking Inc. [910 shares x $64] (a)	$58,240
Pavlov Co. [2,470 shares x $50] (b)	123,500
Total fair value (a + b)	$181,740

Working note 3 - Calculation of unrealized gain (loss):
	Cost
Total cost of securities [Refer working note 1]	$117,689
Total fair value of securities [Refer working note 2]	181,740
Unrealized gain [Total fair value - Total cost]	$64,051

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo Company...

Balance Sheet Presentation of Available-for-Sale Investments During Year 1, its first year of operations, Galileo Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Hawking Inc. 850 $42,925 Pavlov Co. 2,300 60,490 Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $60 per share and the Pavlov Co. stock had a market value of $47 per share. Galileo Company had net income of $332,000 and paid no dividends for the...

During 2019, its first year of operations, A Company purchased 4 available-for-sale investments as follows: Security...

During 2019, its first year of operations, A Company purchased 4 available-for-sale investments as follows: Security Shares Purchased Total Cost Co 1 3500 $67000 Co 2 2215 $72620 Co 3 1000 $21550 Co 4 2250 $58000 Assume that as of November 30, 2019, the Co 1 stock had a market value of $23 per share, Co 2. stock had a market value of $23 per share, Co 3 stock had a market value of $38 per share and Co...

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

. 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...

Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations: Name...

Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations: Name Number of Shares Cost Dust Devil, Inc. 1,900 $81,700 Gale Co. 860 69,660 Whirlwind Co. 2,840 110,760 Total $262,120 The market price per share for the available-for-sale security portfolio on December 31, Year 1, was as follows: Market Price per Share, Dec. 31, Year 1 Dust Devil, Inc. $39 Gale Co. 75 Whirlwind Co. 42 Required: A. Provide the journal entry to adjust the...

1)Available-for-sale securities are reported on the balance sheet A) In the Investments classification at their historic...

1)Available-for-sale securities are reported on the balance sheet A) In the Investments classification at their historic cost B) In the Current Assets classification at their market value C) In the Investments classification at their market value D) In the Stockholders’ Equity section at their market value. 2) Using the indirect method (statement of cash flows), a decrease in inventory would: A) be subtracted from net income B) be added to net income C) have no adjustment made to net income...

Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The...

Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The cost and fair value of this portfolio on December 31, 2016, was as follows: 1 Name Number of Shares Total Cost Total Fair Value 2 Tornado Inc. 830.00 $14,857.00 $16,185.00 3 Tsunami Corp. 1,230.00 31,488.00 34,809.00 4 Typhoon Corp. 2,170.00 44,268.00 43,834.00 5 Total $90,613.00 $94,828.00 On June 12, 2017, Hurricane purchased 1,400 shares of Rogue Wave Inc. at $50 per share plus a...

Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The...

Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The cost and fair value of this portfolio on December 31, 2016, was as follows: 1 Name Number of Shares Total Cost Total Fair Value 2 Tornado Inc. 760.00 $12,920.00 $14,820.00 3 Tsunami Corp. 1,220.00 30,988.00 34,648.00 4 Typhoon Corp. 2,170.00 44,051.00 43,400.00 5 Total $87,959.00 $92,868.00 On June 12, 2017, Hurricane purchased 1,440 shares of Rogue Wave Inc. at $48 per share plus a...

Exercise 15-1 During its first year of operations, Vaughn Corporation had the following transactions pertaining to...

Exercise 15-1 During its first year of operations, Vaughn Corporation had the following transactions pertaining to its common stock. Jan. 10 Issued 83,100 shares for cash at $6 per share. Mar. 1 Issued 5,000 shares to attorneys in payment of a bill for $35,500 for services rendered in helping the company to incorporate. July 1 Issued 32,000 shares for cash at $8 per share. Sept. 1 Issued 64,300 shares for cash at $10 per share. (a) Prepare the journal entries...

Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.

Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 Jan. 20 Purchased Johnson & Johnson bonds for $29,500. Feb. 9 Purchased notes of Sony for $63,540. June 12 Purchased bonds of Mattel for $49,500. Dec. 31 Fair values for debt in the portfolio are Johnson & Johnson, $32,300; Sony, $55,750; and Mattel, $57,850. Year 2...

Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.

Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities.Year 1 Jan. 20 Purchased Johnson & Johnson bonds for $26,000. Feb. 9 Purchased notes of Sony for $60,390. June 12 Purchased bonds of Mattel for $46,000. Dec. 31 Fair values for debt in the portfolio are Johnson & Johnson, $30,100; Sony, $49,650; and Mattel, $54,850. Year 2 Apr....

Subjects