Stock Investment Transactions, Equity Method and Available-for-Sale Securities

Glacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31:

Year 1

Jan. 18. Purchased 8,600 shares of Malmo Inc. as an available-for-sale investment at $48 per share, including the brokerage commission.

July 22. A cash dividend of $0.50 per share was received on the Malmo stock.

Oct. 5. Sold 3,900 shares of Malmo Inc. stock at $53 per share less a brokerage commission of $40.

Dec. 18. Received a regular cash dividend of $0.50 per share on Malmo Inc. stock.

Dec. 31 Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $46 per share.

Use the valuation allowance for available-for-sale investments account in making the adjustment.

Year 2

Jan. 25. Purchased an influential interest in Helsi Co. for $560,000 by purchasing 35,000 shares directly from the

estate of the founder of Helsi. There are 100,000 shares of Helsi Co. stock outstanding.

July 16. Received a cash dividend of $0.60 per share on Malmo Inc. stock.

Dec. 16. Received a cash dividend of $0.60 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock.

Dec. 31 Received $17,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $70,000 in Year 2.

Glacier Products Inc. uses the equity method of accounting for its investment in Helsi Co.

Dec. 31 Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $51 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $46 to $51 per share.

Required:

1.Journalize the entries to record the preceding transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. In your computations, round per share amounts to two decimal places.

Date Description Debit Credit

Year 1

Jan. 18.

July 22.

Oct. 5.

Dec. 18.

Dec. 31

Year 2

Jan. 25.

July 16.

Dec. 16.

Dec. 31-Dividends

Dec. 31-Income

Dec. 31-Valuation

2.Prepare the investment-related asset and stockholders' equity balance sheet presentation for Glacier Products Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is $409,000.

Glacier Products, Inc.

Balance Sheet (selected items)

December 31, Year 2

Current Assets:

Investments:

Stockholders' Equity: