Accounting (Text Only)
26th Edition
ISBN: 9781285743615
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 15, Problem 15.23EX
(a)
To determine
Available-for-sale securities: These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.
To indicate: The presentation of available-for-sale investments on the current assets section of the
(b)
To determine
To indicate: The presentation of available-for-sale investments on the
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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.
760
$34,124
Pavlov Co.
2,060
48,204
Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $53 per share and the Pavlov Co. stock had a market value of $42 per share. Galileo Company had net income of $264,300 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:
$
$
b. Prepare the Stockholders' Equity section of the balance sheet to reflect the earnings and unrealized gain (loss) for…
Chapter 15 Solutions
Accounting (Text Only)
Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - How does the accounting for a dividend received...Ch. 15 - Prob. 5DQCh. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQCh. 15 - How would a debit balance in Unrealized Gain...Ch. 15 - What are the factors contributing to the trend...Ch. 15 - Prob. 10DQ
Ch. 15 - Prob. 15.1APECh. 15 - Bond investment transactions Journalize the...Ch. 15 - Prob. 15.2APECh. 15 - Stock investment transactions On September 12,...Ch. 15 - Prob. 15.3APECh. 15 - Prob. 15.3BPECh. 15 - Prob. 15.4APECh. 15 - Prob. 15.4BPECh. 15 - Prob. 15.5APECh. 15 - Prob. 15.5BPECh. 15 - Prob. 15.6APECh. 15 - Prob. 15.6BPECh. 15 - Prob. 15.1EXCh. 15 - Prob. 15.2EXCh. 15 - Prob. 15.3EXCh. 15 - Prob. 15.4EXCh. 15 - Prob. 15.5EXCh. 15 - Entries for investment in stock, receipt of...Ch. 15 - Prob. 15.7EXCh. 15 - Prob. 15.8EXCh. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Prob. 15.10EXCh. 15 - Prob. 15.11EXCh. 15 - Prob. 15.12EXCh. 15 - Prob. 15.13EXCh. 15 - Prob. 15.14EXCh. 15 - Prob. 15.15EXCh. 15 - Prob. 15.16EXCh. 15 - Fair value journal entries, trading investments...Ch. 15 - Prob. 15.18EXCh. 15 - Prob. 15.19EXCh. 15 - Prob. 15.20EXCh. 15 - Prob. 15.21EXCh. 15 - Prob. 15.22EXCh. 15 - Prob. 15.23EXCh. 15 - Prob. 15.24EXCh. 15 - Prob. 15.25EXCh. 15 - Prob. 15.26EXCh. 15 - Prob. 15.27EXCh. 15 - Prob. 15.28EXCh. 15 - Prob. 15.29EXCh. 15 - Prob. 15.1APRCh. 15 - Prob. 15.2APRCh. 15 - Stock Investment transaction, equity method and...Ch. 15 - Prob. 15.4APRCh. 15 - Prob. 15.1BPRCh. 15 - Prob. 15.2BPRCh. 15 - Stock investment transactions, equity method and...Ch. 15 - Prob. 15.4BPRCh. 15 - Selected transactions completed by Equinox...Ch. 15 - Benefits of fair value On July 16, 1998, Wyatt...Ch. 15 - International fair value accounting International...Ch. 15 - Prob. 15.3CPCh. 15 - Warren Buffett and "look-through" earnings...Ch. 15 - Prob. 15.5CP
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- The investments of Steelers Inc. include a single investment: 33,100 shares of Bengals Inc. common stock purchased on September 12, 2016, for 13 per share including brokerage commission. These shares were classified as available-for-sale securities. As of the December 31, 2016, balance sheet date, the share price declined to 11 per share. a. Journalize the entries to acquire the investment on September 12 and record the adjustment to fair value on December 31, 2016. b. How is the unrealized gain or loss for available-for-sale investments disclosed on the financial statements?arrow_forwardOBrien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December 31, 2017 and 2016 follow. Selected missing balances are shown by letters. Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, 2016, are as follows: Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding shares of Jolly Roger Co. The following selected investment transactions occurred during 2017: May 5. Purchased 3,080 shares of Gozar Inc. at 30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security. Oct. 1. Purchased 40,000 of Nightline Co. 6%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. 9. Dividends of 12,500 are received on the Jolly Roger Co. investment. Dec. 31. Jolly Roger Co. reported a total net income of 112,000 for 2017. OBrien Industries Inc. recorded equity earnings for its share of Jolly Roger Co. net income. 31. Accrued three months of interest on the Nightline bonds. 31. Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: 31. Closed the OBrien Industries Inc. net income of 146,230. OBrien Industries Inc. paid no dividends during the year. Instructions Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.arrow_forwardQuestion (a) An investor purchased the share of Neptune Corp on 1 Jan 2017 and held the investment until 31 December 2021. Details of Neptune Corp's share price and dividend payout during the period of investment are as follows: Date Share Price 01 jan 2017 8.50 31 Dec 2017 8.80 31 Dec 2018 9.15 31 Dec 2019 9.22 31 Dec 2020 8.87 31 Dec 2021 9.12 Compute: (i) Arithmetic rate of return for 2017, 2018, 2019, 2020 and 2021 separately. (ii) Geometric average rate of return for the entire period of investment from 2017 until 2021. (iii) Logarithmic returns for the entire period of investment from 2017 until 2021. (b) Discuss four differences between investing in stocks and investing in bonds. Dividend 0.30 0.35 0.38 0.22 0.30arrow_forward
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