The following transactions pertain to Harrison Imports for Year 1: 4 8.24/10 points awarded 1. Started business by acquiring $30,500 cash from the issue of common stock. 2. Provided $72,600 of services for cash. 3. Invested $30,500 in marketable investment securities. 4. Paid $24,950 of operating expense. 5. Received $750 of investment income from the securities. 6. Invested an additional $12,000 in marketable investment securities. 7. Paid a $2,000 cash dividend to the stockholders. 8. Sold investment securities that cost $6,975 for $9,300. 9. Received another $1,100 in investment income. 10. Determined the market value of the investment securities at the end of the year was $33,225. Scored Required: Use a vertical statements model to prepare a Year 1 income statement, balance sheet, and statement of cash flows, assuming that the marketable investment securities were classified as (a) held to maturity, (b) trading, and (c) available for sale. (Hint: Record the events in T-accounts prior to preparing the financial statements.) (Record the transactions in the given order. Amounts to be deducted, cash outflows and losses should be indicated with a minus sign.) (a) Held-to-Maturity Cash Investment Securities Beg. Bal. Beg. Bal. 1. 3 6,9758 30,500 12,000 2. 6. OOOO 30,500 72,600 750 9,300 1,100 30,5003 24,9504 12,000 6 2,000 5. OOOO 8. End. Bal. 35,525 9. End. Bal 44,800 Common Stock Dividends Bea. Bal. Bea Bal. Beg. Bal. 4 Beg. Bal 7. 30,500 1. 2,000 End. Bal. 30,500 End. Bal. 2,000 8.24/10 points awarded Service Revenue Investment Income Beg. Bal. Beg. Bal. Scored 72,6002 750 5 1,1009 End. Bal. 72,600 End. Bal. 1,850 Gain on Sale of Invest. Operating Expenses Beg. Bal. Beg. Bal. 4. 2,325 8. 24,950 End. Bal. 2,325 End. Bal. 24,950 (b) Trading Cash Investment Securities Beg. Bal. Beg. Bal. 3. 1. 2. 30,500 72,600 750 30,5003 24,9504 12,000 6 30,500 12,000 6,9758 2,30010 6. 5. 4 Cash Investment Securities Beg. Bal. Beg. Bal. 3. 1. 30,500 12,000 6,9758 2,30010 2. 6. 8.24/10 points awarded OOOOO 30,500 72,600 750 9,300 1,100 | 30,5003 24,9504 12.000 6 2,0007 5. OOOO 8. End. Bal. 33,225 Scored 9. End. Bal. 44,800 Common Stock Dividends Beg. Bal. Beg. Bal. 7 30,500 1. 2,000 End. Bal 30,500 End. Bal. 2,000 Service Revenue Investment Income Beg. Bal. Beg. Bal. 72,6002 750 5. 1,1009 End. Bal. 72,600 End. Bal. 1,850 Gain on Sale of Invest. Operating Expenses Beg. Bal. Beg. Bal. 2,3258 4. 10. End. Bal. 24,950 2,300 27,250 End. Bal. 2,325 End. Bal. 2,325 End. Bal. 27,250 4 (Income Statement Account) Unrealized Gain/Loss Beg. Bal. X .24/10 pints awarded End. Bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Scored (c) Available-for-Sale Cash Investment Securities Beg. Bal. Beg. Bal. 1. 3. 30,500 72,600 30,500 12,000 6,975 2,300 8. 10. >>> 2. 6. 6. 30,500 24,950 12,000 2,000 3. 4. 6. 7. 750 co End. Bal. 33,225 9,300 1,100 9. End. Bal. 44,800 Common Stock Dividends Beg. Bal. Beg. Bal. 30,500 1. 7. 2,000 End. Bal. 30,500 End. Bal. 2,000 30,5001 S 2,000 4 End. Bal. 30,500 End. Bal 2,000 Service Revenue .24/10 oints awarded Accum. Other Comp. Income Unrealized Gain/Loss Beg. Bal. 10. 2,300 Beg. Bal. 72,600 2. Scored End. Bal. 2,300 End. Bal. 72,600 Investment Income Gain on Sale of Invest. Beg. Bal. Beg. Bal. 2,3258 7505 1,1009 End. Bal. 2,325 End. Bal. 1,850 Operating Expenses Beg. Bal. 4. 24,950 End. Bal. 24,950 HARRISON IMPORTS In Am Cendawand 4 8.24/10 points awarded Scored HARRISON IMPORTS Income Statements For the Year Ended Year 1 Investment Securities Classified as Held-to- Available- Maturity Trading for-Sale Investment revenue $ 72,600 $ 72,600 $ 72,600 Realized gains X 2,325 X 2,325 X 2,325 X Operating income 70,275 70,275 70,275 Unrealized gains (loss) 2,300 X 0 X x X x X X X X $ 70,275 $ 72,575 $ 70,275 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 0 HARRISON IMPORTS Balance Sheets As of December 31, Year 1 Held-to- Investment Securities Classified as Maturity Assets Cash $ 44,800 Investment securities X 35,525 Trading Available- for Sale EA $ 44,800 33,225 44,800 33,225 nnnn Im inn 4 8.24/10 points awarded Scored $ HARRISON IMPORTS Balance Sheets As of December 31, Year 1 Held-to- Available- Investment Securities Classified as Maturity Trading for-Sale Assets Cash $ 44,800 44,800 $ 44,800 Investment securities X 35,525 33,225 33,225 X Total Assets $ 80,325 $ 78,025 $ 78,025 Stockholders' Equity Common stock $ 30,500 $ 30,500 $ 30,500 Retained earnings 49,825 47,525 49,825 Accumulated other comprehensive income 0 2,300 Total Stockholders' Equity $ 80,325 $ 78,025 $ 82,625 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. HARRISON IMPORTS Statements of Cash Flows For the Year Ended December 31, Year 1 Investment Securities Classified as Held-to- Maturity Cash flows from operating activities: Receipts from investment income 1,850 $ Trading Available- for Sale 1,850 $ 1,850 4 24/10 oints awarded Scored >>IX HARRISON IMPORTS Statements of Cash Flows For the Year Ended December 31, Year 1 Investment Securities Classified as Held-to- Available- Maturity Trading for Sale Cash flows from operating activities: Receipts from investment income $ 1,850 $ 1,850 $ 1,850 Paid to purchase securities 0 (27,250) 0 Receipts from sale of securities 0 2,325 X 0 X X X x X Net cash flow from operating activities: 1,850 (23,075) 1,850 Cash flow from investing activities: Paid to purchase securities (42,500) 0 (42,500) Receipts from sale of securities 9,300 0 9,300 Net cash flow from investing activities (33,200) (33,200) Cash flow from financing activities Proceeds from stock issue 30,500 30,500 30,500 x Net cash flow from financing activities 30,500 30,500 30,500 Net change in cash 44,800 44,800 44,800 Plus: Beginning cash balance Ending cash balance $ 44,800 $ 44,800 $ 44,800 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 0 0 0 The following transactions pertain to Harrison Imports for Year 1: 4 8.24/10 points awarded 1. Started business by acquiring $30,500 cash from the issue of common stock. 2. Provided $72,600 of services for cash. 3. Invested $30,500 in marketable investment securities. 4. Paid $24,950 of operating expense. 5. Received $750 of investment income from the securities. 6. Invested an additional $12,000 in marketable investment securities. 7. Paid a $2,000 cash dividend to the stockholders. 8. Sold investment securities that cost $6,975 for $9,300. 9. Received another $1,100 in investment income. 10. Determined the market value of the investment securities at the end of the year was $33,225. Scored Required: Use a vertical statements model to prepare a Year 1 income statement, balance sheet, and statement of cash flows, assuming that the marketable investment securities were classified as (a) held to maturity, (b) trading, and (c) available for sale. (Hint: Record the events in T-accounts prior to preparing the financial statements.) (Record the transactions in the given order. Amounts to be deducted, cash outflows and losses should be indicated with a minus sign.) (a) Held-to-Maturity Cash Investment Securities Beg. Bal. Beg. Bal. 1. 3 6,9758 30,500 12,000 2. 6. OOOO 30,500 72,600 750 9,300 1,100 30,5003 24,9504 12,000 6 2,000 5. OOOO 8. End. Bal. 35,525 9. End. Bal 44,800 Common Stock Dividends Bea. Bal. Bea Bal. Beg. Bal. 4 Beg. Bal 7. 30,500 1. 2,000 End. Bal. 30,500 End. Bal. 2,000 8.24/10 points awarded Service Revenue Investment Income Beg. Bal. Beg. Bal. Scored 72,6002 750 5 1,1009 End. Bal. 72,600 End. Bal. 1,850 Gain on Sale of Invest. Operating Expenses Beg. Bal. Beg. Bal. 4. 2,325 8. 24,950 End. Bal. 2,325 End. Bal. 24,950 (b) Trading Cash Investment Securities Beg. Bal. Beg. Bal. 3. 1. 2. 30,500 72,600 750 30,5003 24,9504 12,000 6 30,500 12,000 6,9758 2,30010 6. 5. 4 Cash Investment Securities Beg. Bal. Beg. Bal. 3. 1. 30,500 12,000 6,9758 2,30010 2. 6. 8.24/10 points awarded OOOOO 30,500 72,600 750 9,300 1,100 | 30,5003 24,9504 12.000 6 2,0007 5. OOOO 8. End. Bal. 33,225 Scored 9. End. Bal. 44,800 Common Stock Dividends Beg. Bal. Beg. Bal. 7 30,500 1. 2,000 End. Bal 30,500 End. Bal. 2,000 Service Revenue Investment Income Beg. Bal. Beg. Bal. 72,6002 750 5. 1,1009 End. Bal. 72,600 End. Bal. 1,850 Gain on Sale of Invest. Operating Expenses Beg. Bal. Beg. Bal. 2,3258 4. 10. End. Bal. 24,950 2,300 27,250 End. Bal. 2,325 End. Bal. 2,325 End. Bal. 27,250 4 (Income Statement Account) Unrealized Gain/Loss Beg. Bal. X .24/10 pints awarded End. Bal. *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Scored (c) Available-for-Sale Cash Investment Securities Beg. Bal. Beg. Bal. 1. 3. 30,500 72,600 30,500 12,000 6,975 2,300 8. 10. >>> 2. 6. 6. 30,500 24,950 12,000 2,000 3. 4. 6. 7. 750 co End. Bal. 33,225 9,300 1,100 9. End. Bal. 44,800 Common Stock Dividends Beg. Bal. Beg. Bal. 30,500 1. 7. 2,000 End. Bal. 30,500 End. Bal. 2,000 30,5001 S 2,000 4 End. Bal. 30,500 End. Bal 2,000 Service Revenue .24/10 oints awarded Accum. Other Comp. Income Unrealized Gain/Loss Beg. Bal. 10. 2,300 Beg. Bal. 72,600 2. Scored End. Bal. 2,300 End. Bal. 72,600 Investment Income Gain on Sale of Invest. Beg. Bal. Beg. Bal. 2,3258 7505 1,1009 End. Bal. 2,325 End. Bal. 1,850 Operating Expenses Beg. Bal. 4. 24,950 End. Bal. 24,950 HARRISON IMPORTS In Am Cendawand 4 8.24/10 points awarded Scored HARRISON IMPORTS Income Statements For the Year Ended Year 1 Investment Securities Classified as Held-to- Available- Maturity Trading for-Sale Investment revenue $ 72,600 $ 72,600 $ 72,600 Realized gains X 2,325 X 2,325 X 2,325 X Operating income 70,275 70,275 70,275 Unrealized gains (loss) 2,300 X 0 X x X x X X X X $ 70,275 $ 72,575 $ 70,275 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 0 HARRISON IMPORTS Balance Sheets As of December 31, Year 1 Held-to- Investment Securities Classified as Maturity Assets Cash $ 44,800 Investment securities X 35,525 Trading Available- for Sale EA $ 44,800 33,225 44,800 33,225 nnnn Im inn 4 8.24/10 points awarded Scored $ HARRISON IMPORTS Balance Sheets As of December 31, Year 1 Held-to- Available- Investment Securities Classified as Maturity Trading for-Sale Assets Cash $ 44,800 44,800 $ 44,800 Investment securities X 35,525 33,225 33,225 X Total Assets $ 80,325 $ 78,025 $ 78,025 Stockholders' Equity Common stock $ 30,500 $ 30,500 $ 30,500 Retained earnings 49,825 47,525 49,825 Accumulated other comprehensive income 0 2,300 Total Stockholders' Equity $ 80,325 $ 78,025 $ 82,625 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. HARRISON IMPORTS Statements of Cash Flows For the Year Ended December 31, Year 1 Investment Securities Classified as Held-to- Maturity Cash flows from operating activities: Receipts from investment income 1,850 $ Trading Available- for Sale 1,850 $ 1,850 4 24/10 oints awarded Scored >>IX HARRISON IMPORTS Statements of Cash Flows For the Year Ended December 31, Year 1 Investment Securities Classified as Held-to- Available- Maturity Trading for Sale Cash flows from operating activities: Receipts from investment income $ 1,850 $ 1,850 $ 1,850 Paid to purchase securities 0 (27,250) 0 Receipts from sale of securities 0 2,325 X 0 X X X x X Net cash flow from operating activities: 1,850 (23,075) 1,850 Cash flow from investing activities: Paid to purchase securities (42,500) 0 (42,500) Receipts from sale of securities 9,300 0 9,300 Net cash flow from investing activities (33,200) (33,200) Cash flow from financing activities Proceeds from stock issue 30,500 30,500 30,500 x Net cash flow from financing activities 30,500 30,500 30,500 Net change in cash 44,800 44,800 44,800 Plus: Beginning cash balance Ending cash balance $ 44,800 $ 44,800 $ 44,800 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 0 0 0