Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Textbook Question
Chapter 15, Problem 15.4BPR
Investment reporting
Teasdale Inc. manufactures and sells commercial and residential security equipment. The comparative unclassified balance sheets for December 31, Year 2 and Year 1 are provided below. Selected missing balances are shown by letters.
| Teasdale Inc. Balance Sheet December 31, Year 2 and Year 1 |
||
| Dec. 31, Year 2 | Dec. 31, Year 1 | |
| Cash | $160,000 | $ 156,000 |
| Accounts receivable (net) | 11S.OOO | 108,000 |
| Available for-sale investments (at cost)—Note 1 | $ a. | $ 91,200 |
| Plus valuation allowance for available-for-sale investments | b. | 8,776 |
| Available for-sale investments (fair value) | $ c | $ 99,976 |
| Interest receivable | $ d. | — |
| Investment in Wright Co. stock—Note 2 | e. | $ 69,200 |
| Office equipment (net) | 96,000 | 105,000 |
| Total assets | $ f. | 5538,176 |
| Accounts payable | $ 91,000 | $ 72,000 |
| Common stock | 80,000 | 80,000 |
| Excess of issue price over par | 250,000 | 250,000 |
| g | 127,400 | |
| Unrealized gain (loss) on available for-sale investments | h. | 8,776 |
| Total liabilities and |
S i. | 5538,176 |
Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows:
| No. of Shares | Cost per Share | Total Cost | Total Fair Value | |
| Alvarez Inc stock | 960 | $38,00 | $36,480 | $39,936 |
| Hirsch Inc. stock | 1,900 | 28,80 | $4,720 | 60,040 |
| $91,200 | $99,976 |
Note 2. The Investment in Wright Co. stack is an equity method investment representing 30% of the outstanding shares of Wright Co.
The following selected investment transactions occurred during Year 2:
| Mar. 18. | Purchased 800 shares of Richter Inc. at $40, including brokerage commission. Richter is classified as an available-for-sale security. |
| July 12. | Dividends of $12,000 art: received on the Wright Co. investment. |
| Oct 1. | Purchased $24,000 of Toon Co. 4%, 10-year bonds at 100. the bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. |
| December 31. | Wright Co. reported a total net income of $80,000 for Year 2. Teasdale recorder equity earnings for its share of Wright Co. net income. |
| 31. | Accrued interest for three months on the Toon Co. bonds purchased on October 1. |
| 31. | Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: |
| Available for Sale Investments | Fair Value |
| Alvarez Inc. stock | $41,50 per share |
| Hirsch Inc stock | $26,00 per share |
| Richter Inc. stock | $48,00 per share |
| Toon Co. bonds | 101 per $ 100 of face amount |
31. Closed the Teasdale Inc. net income of $51,240. Teasdale Int. paid no dividends during the year.
Instructions
Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.
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