In June 2013, Jolicure Inc. (Jolicure) and Horsefly Inc. (Horsefly) each began operations. Each company was formed with an initial capital contribution of \($100,000\). During the year ended May 31, 2014, each company had revenue of \($225,000\) and total expenses of \($175,000\). In addition, during the first year of operations, each company purchased 1,000 shares of Nictaux Ltd.

(Nictaux), a public company, for \($12\) per share. In May 2014, Horsefly sold its shares in Nictaux for \($20\) per share and immediately repurchased them at the same price.

Jolicure didn’t sell its shares during fiscal 2014. On May 31, 2014, each company had total assets (excluding the shares in Nictaux) of \($168,000\) and total liabilities of \($30,000\). For both companies, the investment was considered as available for sale.

Assume that the market value of the investment on May 31, 2014 was \($20\) per share.

Required:

a. Prepare summarized balance sheets and income statements for Jolicure and Horsefly as of May 31, 2014.

b. Which company performed better in fiscal 2014?

c. Why do you think Horsefly sold and repurchased the shares in Nictaux? Do you think that this was a wise transaction to enter into? Explain.