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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Balance sheet presentation, trading investments

The income statement for Delta-tec Inc. for the year ended December 31, Year 2, was as follows:

Delta-tec Inc.

Income Statement (selected items)

For the Year Ended December 31, Year 2

Income from operations $299,700
Gain on sale of investments 17.800
Unrealized loss on trading investments (72.500)
Net income $245.000

The balance sheet dated December 31, Year 1, showed a Retained Earnings balance of $825,000. During Year 2, the company purchased trading investments for the first time at a cost of $346,000. In addition, trading investments with a cost of $66,000 were sold at a gain during Year 2. The company paid $65,000 in dividends during Year 2.

a. Determine the December 31, Year 2, Retained Earnings balance.

b. Provide the December 31. Year 2, balance sheet presentation for Trading Investments.

(a)

To determine

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

To determine: The balance of retained earnings as on December 31, Year 2

Explanation

Compute the retained earnings balance as December 31, Year 2.

Retained earningsfor Year 2} ={Retained earnings, Year&

(b)

To determine

To indicate: The presentation of trading investments on the balance sheet

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