During the first year of operations, Makala Company purchased two available-for-
ID: 2417309 • Letter: D
Question
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, the Oceanna Company stock had a market value of $49 per share and Rockledge, Inc. 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.
(a) Prepare the current assets section of the balance sheet presentation for the available-for sale securities as of December 31.* (b) Prepare the stockholders’ equity section of the balance sheet as of December 31.*Explanation / Answer
Current assets section of the balance sheet presentation for the available-for sale securities as of December 31
Oceanna Company
$34300
Rockledge, Inc.
$38000
Stockholders’ equity
$ 72300
Shareholder’s equity section of the balance sheet as of December 31
Common stock
$150000
Retained earnings
$107300
Stockholders’ equity
$257300
Retained earnings
Net income = $105000
Unrealised gain/loss = 5300-3000 = $ 2300
Retained earnings = $ 107300
Current assets section of the balance sheet presentation for the available-for sale securities as of December 31
Oceanna Company
$34300
Rockledge, Inc.
$38000
Stockholders’ equity
$ 72300
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