Stock Investment Transactions, Equity Method and Available: for-Sale Securities

Question

Stock Investment Transactions, Equity Method and Available: for-Sale Securities Roman Products, Inc., is a wholesaler or men's nair products. The company began operations on January l, 2014. The following transactions relate to securities acquired by Roman Products, Inc., which fas a fiscal year ending on December 31: Jan. 3 Purchased 5,900 shares of Whalen Inc as ar available -forsake security a: $42 per share, including the brokerage commission. July 8 Received a cash divided of SO.60 per share on the Whalen stock. Oct. 19 Sold 1.800 shares of Whalen Inc. stock at $45 per share, less a brokerage commission or $40. Dec. 12 A cash divided of $0.60 per share was received or tre Whalen stock. Dec. 31 Whalen Inc. is classified as an available for sale investment and is adjusted to a fair value of $39 per share, use the valuation allowance for available-fcr-sale investments account in making tre adjustment. Jan. 5 Purchased an influential interest in Tasmania Ire. for $600,000 by purchasing 76,000 shares directly from the estate of the founder of Tasmania Inc. There are 190.000 shares of Tasmania Inc. stock outstanding. July 9 Received a cash divided of $0.70 per share on Whalen Ire. stock. Dec. 8 Received a cash divided of $0.70 per share plus an extra dividend of $0.15 per share or Nairn Ire. stock. Dec. 31 Received $18,000 of cash dividends or Tasmania Inc. stock. Tasmania Ire. reported net income of $74,000 in 2015. Roman Products Loses the equity method of accounting for its investment in Tasmania Inc. Dec. 31 Whalen Inc. is classified as an available for sale investment and is adjusted to a fair value of $46 per share, use the valuation allowance for available for sale investments account in making the adjustment for the change in rair value from $39 to $46 per share.

Explanation / Answer

2014 3-Jan Investment in Shares A/c Dr 247800 To Bank A/c 247800 (Being Shares Purchased) 8-Jul Bank A/c Dr 3540 To Dividend Income A/c 3540 (Being Income Received) 19-Oct Bank A/c Dr 80960 To Profit on Sale of Shares A/c 5360 To Investment in Shares A/c 75600 (Being Shares Sold) 12-Dec Bank A/c Dr 2460 To Dividend Income A/c 2460 (Being Income Received) 31-Dec Investment Allowance A/c Dr 12300 To Investment in Shares A/c 12300 (being Investment Reported) 2015 5-Jan Investment in Tasamania A/c Dr 600000 To Bank A/c 600000 (Being Shares Purchased) 9-Jul Bank A/c Dr 2870 To Dividend Income A/c 2870 (Being Income Received) 8-Dec Bank A/c Dr 3485 To Dividend Income A/c 3485 (Being Income Received) 31-Dec Investment in Tasamania A/c Dr 29600 To Dividend Income A/c 29600 (Being Income Recognised on the basis of equity method) 31-Dec Bank A/c Dr 18000 To Investment in Tasamania A/c 18000 (Being Amount Received) 31-Dec Investment in Shares A/c 28700 To Investment Allowance A/c 28700 (being Investment Reported) Part 2 Balance Sheet on December 31,2015 Current Assets Bank A/c (B.f) -345800 -345800 Investments 800200 454400 Shareholder's Equity Investments Allowance 16400 Retained Earnings 438000 454400

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