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Fair Value Adjustments II Fair Value Adjustments: Saltz Co. purchased 420 shares of Tolek Co.'s stock for $62 per share on December 12, 2012.
Fair Value Adjustments II Fair Value Adjustments: Saltz Co. purchased 420 shares of Tolek Co.'s stock for $62 per share on December 12, 2012. On December 31, 2012 and 2013 the market price of Tolek Co.'s stock was $68 and $60 per share, respectively. Saltz Co. plans to sell the securities, but not in the near future. Therefore, they will be classified as available for sale. Salt's sales revenue was $482,000, while operating expenses totaled $318,000 in 2012. In 2013, revenues were $620,000, while operating expenses were $408,000. Beginning stockholder's equity consisted of the following: Stockholder's Equity, January 1, 2012: Common Stock $8,400 Paid-in-Capital in Excess of Par Value 688,200 Retained Earnings 328,000 Total Stockholder's Equity 1,024,600 Fair Value Adjustments II: On December 31, 2013 the market price of Tolek Co.'s stock was $60 per share. Saltz's sales revenues were $620,000, while operating expenses were $408,000 in 2013. In addition, Tolek Co. paid a dividend on its common stock of $2.2 per share. Saltz Co. also purchased $420,000 face value of Tolek's 8 percent bonds at par on January 1, 2012. The bonds pay interest annually, in addition they will be classified as available-for-sale. The market value of the bonds was $428,000 and $418,000 on December 31, 2012 and 2013, respectively. Saltz Co. also purchased an additional $220,000 of Tolek's 10 percent bonds on January 1, 2013. The bonds also pay interest annually, but will be classified as held-to-maturity. The market value of the bonds was $224,000 on December 31, 2013. Required: 1. Prepare the journal entry to record the interest on the bonds in 2012 and 2013, in addition to the dividends in 2013. 2. Calculate the Unrealized Gain or Loss on the investment in Tolek Co.'s securities in 2012, and 2013. Prepare the adjusting entry to adjust the value of the securities in the accounting records to fair value on December 31, 2012, and 2013. 3. Prepare an income statement including comprehensive income, and the stockholder's equity section of the balance sheet for both years.
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