Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.
Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys
900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% of
Hurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month and
then sell it. The purchase occurs on December 15, 2018. On December 31, the market price of a
share of Hurricane stock is $58 per share.
Requirements
1. What type of investment is this for Amherst? Give the reason for your answer.
2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment to
market value on December 31.
3. Show how Amherst would report this investment on its balance sheet at December 31 and
any gain or loss on its income statement for the year ended December 31, 2018.
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