Assessing Financial Statement Effects Investments

On January 1, Ball Corporation purchased shares of Leftwich Company common stock. (a) Assume that the stock acquired by Ball represents 15% of Leftwich's voting stock and that Ball has no influence over Leftwich's business decisions. Use the financial statement effects template to record the following transactions: (1) Ball purchased 10,000 common shares of Leftwich at $17 cash per share. (2) Leftwich reported annual net income of $80,000. (3) Ball received a cash dividend of $1.20 per common share from Leftwich. (4) Year-end market price of Leftwich common stock is $19 per share.

Use negative signs with your answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
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(2)	Answer		Answer		Answer		Answer		Answer
(3)	Answer		Answer		Answer		Answer		Answer
(4)	Answer		Answer		Answer		Answer		Answer

Income Statement
Revenue	-	Expenses	=	Net Income
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(b) Assume that the stock acquired by Ball represents 30% of Leftwich's voting stock and that Ball accounts for this investment using the equity method since it is able to exert significant influence. Use the financial statement effects template to record the following transactions: (1) Ball purchased 10,000 common shares of Leftwich at $17 cash per share. (2) Leftwich reported annual net income of $80,000. (3) Ball received a cash dividend of $1.20 per common share from Leftwich. (4) Year-end market price of Leftwich common stock is $19 per share.

Use negative signs with answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
(1)	Answer		Answer		Answer		Answer		Answer
(2)	Answer		Answer		Answer		Answer		Answer
(3)	Answer		Answer		Answer		Answer		Answer
(4)	Answer		Answer		Answer		Answer		Answer

Income Statement
Revenue	-	Expenses	=	Net Income
Answer		Answer		Answer
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