Stock Investment Transactions, Equity Method and Available-for-Sale Securities
Roman Products, Inc., is a wholesaler of men's hair products. The company began operations on January 1, 2014. The following transactions relate to securities acquired by Roman Products, Inc., which has a fiscal year ending on December 31:
| 2014 | |
| Jan. 3 | Purchased 7,600 shares of Whalen Inc. as an available-for-sale security at $54 per share, including the brokerage commission. |
| July 8 | Received a cash dividend of $0.60 per share on the Whalen stock. |
| Oct. 19 | Sold 3,400 shares of Whalen Inc. stock at $58 per share, less a brokerage commission of $40. |
| Dec. 12 | A cash dividend of $0.60 per share was received on the Whalen stock. |
| Dec. 31 | Whalen Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $52 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment. |
| 2015 | |
| Jan. 5 | Purchased an influential interest in Tasmania Inc. for $760,000 by purchasing 31,500 shares directly from the estate of the founder of Tasmania Inc. There are 90,000 shares of Tasmania Inc. stock outstanding. |
| July 9 | Received a cash dividend of $0.70 per share on Whalen Inc. stock. |
| Dec. 8 | Received a cash dividend of $0.70 per share plus an extra dividend of $0.10 per share on Whalen Inc. stock. |
| Dec. 31 | Received $23,000 of cash dividends on Tasmania Inc. stock. Tasmania Inc. reported net income of $95,000 in 2015. Roman Products uses the equity method of accounting for its investment in Tasmania Inc. |
| Dec. 31 | Whalen Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $58 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the change in fair value from $52 to $58 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.
| Date | Amount | Debit | Credit |
| 2014 | | | |
| Jan. 3 | |
2. Prepare the investment-related asset and stockholders' equity balance sheet presentation for Roman Products, Inc., on December 31, 2015, assuming the Retained Earnings balance on December 31, 2015, is $555,000.
| Roman Products, Inc. Balance Sheet (selected items) December 31, 2015 |
| Current Assets: |
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