On April 16, Youngstown Inc. purchased 900 shares of Cool Company stock when Coo
ID: 2601439 • Letter: O
Question
On April 16, Youngstown Inc. purchased 900 shares of Cool Company stock when Cool’s stock was selling for $15 per share. Youngstown plans to hold this stock indefinitely until the company has a need for cash.
a. On December 31, Cool’s stock is selling for $20 per share. What appears on the financial
statements for Youngstown?
b. If Youngstown reports net income of $190,000, what should the company report as its
comprehensive income?
c. Assume that Youngstown sells this investment three months later when Cool’s shares are selling
for $24 per share. Make the journal entry to record the sale.
Explanation / Answer
(A)
Investment are recorded on the market value i.e. the current market value of the investment is $20*900 = $ 18000 where $5*900 = $4500 will be shown in income statement whether realised or not.
(B)
If the stocks have a market value greater than the purchase value, then any excess amount or any unrealised gain or loss should be adjusted in the comprehensive income. In this example taking the part (A) Comprehensive income will be $190000+$4500 = $194500
(C)
Bank 21600
Investment 13500
Profit on sale 8100
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