Balance Sheet Presentation of Available-for-Sale Investments

During Year 1, its first year of operations, Galileo Company purchased two available-for-sale investments as follows:

Security	Shares Purchased	Cost
Hawking Inc.	570		$19,152
Pavlov Co.	1,540		26,950

Assume that as of December 31, Year 1, the Hawking Inc., stock had a market value of $40 per share and the Pavlov Co. stock had a market value of $32 per share. Galileo Company had net income of $148,000, and paid no dividends for the year ending December 31, Year 1. All of the available-for-sale investments are classified as current assets.

Question Content Area

a. Prepare the Current Assets section of the balance sheet presentation for the available-for-sale investments.

Galileo Company Balance Sheet (selected tems) December 31, Year 1

Assets
Current Assets:
Available-for-Sale Investments, at CostAvailable-for-Sale Investments, at Fair ValueCommon StockRetained EarningsUnrealized Gain (Loss) on Available-for-Sale Investments	$
Less Retained EarningsLess Unrealized Gain (Loss) on Available-for-Sale InvestmentsLess Valuation Allowance for Available-for-Sale InvestmentsPlus Retained EarningsPlus Unrealized Gain (Loss) on Available-for-Sale InvestmentsPlus Valuation Allowance for Available-for-Sale Investments		$

Question Content Area

b. Prepare the Stockholders' Equity section of the balance sheet to reflect the earnings and unrealized gain (loss) for the available-for-sale investments.

Galileo Company Balance Sheet (selected Stockholders' Equity items) December 31, Year 1

Stockholders' Equity
Available-for-Sale Investments, at CostAvailable-for-Sale Investments, at Fair ValueCommon StockRetained EarningsValuation Allowance for Available-for-Sale Investments	$- Select -
Available-for-Sale Investments, at CostAvailable-for-Sale Investments, at Fair ValueCommon StockUnrealized Gain (Loss) on Available-for-Sale InvestmentsValuation Allowance for Available-for-Sale Investments	- Select -