Balance Sheet Presentation of Available-for-Sale Investments During Year 1,it\'s

Question

Balance Sheet Presentation of Available-for-Sale Investments
During Year 1,it's first year of operations,Galileo Company purchased two available -for -sale investments as follows :Security -Hawkins inc Shares Purchased-720 Cost-$30,672
Security-Pavlov Co, Shares Purchased-$1950,Cost-$43,290
   Assume that as of December 31,Year 1,the Hawking Inc,stock had a market value for $51 per share and the Pavlov Co. stock had a market value of $40 per share. Galileo Company had net income of $237,400, and paid no dividends for the year ending December 31,Year 1. All of the Available-for-Sale investments are classified as current assests.
A.Prepare the Current Assests section of the balance sheet presentation for the 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

Explanation / Answer

a. Galio Company Balance Sheet ( Partial ) as on 31 Dec Asset Current Asset Available for Sale investment at cost $73,962.00 Plus Valuation Allowance on Avaialable for Sale Inv. $40,758.00 $114,720.00 Working Note Market Value of Stock Hawking (720 Share X $51 ) $36,720.00 Pavlov Co. (1950 ShareX $40) $78,000.00 Total (a) $114,720.00 Less: Cost($30672+$43290) (b) $73,962.00 Unrealized Gain(a-b) $40,758.00 b. Galileo Company Stockholders Equity ( Partial) Retained Eaning 237400 Unrealized gain on Avaiable for Sale Inv. $40,758.00 Total $278,158.00

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