Question
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,
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 6,100 shares of Malmo Inc. as an available-for-sale security at $42 per share, including the brokerage commission. |
| July 22. | A cash dividend of $0.65 per share was received on the Malmo stock. |
| Oct. 5. | Sold 2,700 shares of Malmo Inc. stock at $45 per share, less a brokerage commission of $60. |
| Dec. 18. | Received a regular cash dividend of $0.65 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 $39 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 $620,000 by purchasing 60,000 shares directly from the estate of the founder of Helsi Co. There are 150,000 shares of Helsi Co. stock outstanding. |
| July 16. | Received a cash dividend of $0.75 per share on Malmo Inc. stock. |
| Dec. 16. | Received a cash dividend of $0.75 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock. |
| Dec. 31 | Received $19,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $78,000 in Year 2. Glacier Products 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 $45 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $39 to $45 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 $453,000.
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 6,100 shares of Malmo Inc. as an available-for-sale security at $42 per share, including the brokerage commission. |
| July 22. | A cash dividend of $0.65 per share was received on the Malmo stock. |
| Oct. 5. | Sold 2,700 shares of Malmo Inc. stock at $45 per share, less a brokerage commission of $60. |
| Dec. 18. | Received a regular cash dividend of $0.65 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 $39 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 $620,000 by purchasing 60,000 shares directly from the estate of the founder of Helsi Co. There are 150,000 shares of Helsi Co. stock outstanding. |
| July 16. | Received a cash dividend of $0.75 per share on Malmo Inc. stock. |
| Dec. 16. | Received a cash dividend of $0.75 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock. |
| Dec. 31 | Received $19,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $78,000 in Year 2. Glacier Products 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 $45 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $39 to $45 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 $453,000.
| Glacier Products, Inc. Balance Sheet (selected items) December 31, Year 2 | ||
|---|---|---|
| Current Assets: | ||
| Investments: | ||
| Stockholders' Equity: | ||
| Glacier Products, Inc. Balance Sheet (selected items) December 31, Year 2 | ||
|---|---|---|
| Current Assets: | ||
| Investments: | ||
| Stockholders' Equity: | ||
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