Balance Sheet Presentation ofAvailable-for-Sale Investments

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

SecurityShares PurchasedCostHawking Inc.620$22,630Pavlov Co.1,68031,920

Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $43 per share and the Pavlov Co. stock had a market value of $34 per share. Galileo Company had net income of $175,100 and paid no dividends for the year ending December 31, Year 1. All of the available-for-sale investments are classified as current assets.

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

Galileo Company

Balance Sheet (selected items)

December 31, Year 1

Assets

Current Assets:

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

Galileo Company

Balance Sheet (selected Stockholders' Equity items)

December 31, Year 1

Stockholders' Equity