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

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 15, Problem 18E
Textbook Problem
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The income statement for Delta-tec Inc. for the year ended December 31, Year 2, was as follows:

Chapter 15, Problem 18E, The income statement for Delta-tec Inc. for the year ended December 31, Year 2, was as follows: The

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.

  1. a. Determine the December 31, Year 2, Retained Earnings balance.
  2. b. Provide the December 31, Year 2, balance sheet presentation for Trading Investments.

(a)

To determine

Calculate the balance of retained earnings as on December 31, Year 2.

Explanation of Solution

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.

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

Retained earningsfor Year 2} ={

(b)

To determine

Indicate the presentation of trading investments on the balance sheet.

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Chapter 15 Solutions

Financial Accounting
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