Broadway Arts Inc. produces and sells theater set designs and costumes. The company began operations on January
Question:
Broadway Arts Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 2010. The following transactions relate to securities acquired by Broadway Arts Inc., which has a fiscal year ending on December 31:
2010
Jan. 10. Purchased 5,000 shares of Crystal Inc. as an available-for-sale security at $36 per share, including the brokerage commission.
Mar. 12. Received the regular cash dividend of $0.80 per share.
Sept. 9. Split Crystal Inc. stock 2 for 1 and received the regular cash dividend of $0.40 per share on the Crystal Inc. stock.
Oct. 14. Sold 1,000 shares of Crystal Inc. stock at $15 per share, less a brokerage commission of $100.
Dec. 31. Crystal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $19 per share. Use the Valuation Allowance for
Available-for-Sale Investments account in making the adjustment.
2011
Jan. 5. Purchased an influential interest in Bulls Eye Inc. for $410,000 by purchasing 50,000 shares directly from the estate of the founder of Bulls Eye Inc.
There are 200,000 shares of Bulls Eye Inc. stock outstanding.
Mar. 8. Received the regular cash divided of $0.45 per share on Crystal Inc. stock.
Sept. 10. Received the regular cash dividend of $0.45 per share plus an extra dividend of $0.10 per share on Crystal Inc. stock.
Dec. 31. Received $35,000 of cash dividends on Bulls Eye Inc. stock. Bulls Eye Inc. reported net income of $126,000 in 2011. Broadway Arts Inc. uses the equity method of accounting for its investment in Bulls Eye Inc.
31. Crystal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $15 per share. Use the Valuation Allowance for
Available-for-Sale Investments account in making the adjustment.
Instructions
1. Journalize the entries to record these transactions.
2. Prepare the investment-related asset and stockholders’ equity balance sheet disclosures for Broadway Arts Inc. on December 31, 2011, assuming the Retained Earnings balance on December 31, 2011, is $390,000.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
1 2010 Jan 10 AvailableforSale Investments x Crystal Inc 180000 Cash 180000 5000 shares 36 per share Mar 12 Cash 4000 Dividend Revenue 4000 5000 share...View the full answer
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
