# 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. Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows: Note 2. The Investment in Wright Co. stock is an equity method investment representing 30% of the outstanding shares of Wright Co. The following selected investment transactions occurred during Year 2: Instructions Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.

### Financial Accounting

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

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 15, Problem 4PB
Textbook Problem
15 views

## 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.Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows:Note 2. The Investment in Wright Co. stock is an equity method investment representing 30% of the outstanding shares of Wright Co.The following selected investment transactions occurred during Year 2:InstructionsDetermine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.

To determine

Find the missing amounts (a) to (i).

### Explanation of Solution

Available-for-sale securities: These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.

(a)

Compute available-for-sale investment, (at cost), for Year 2.

 Security Number of Shares (Or Face Amount) × Cost per Share (Or Bond Value) = Cost of Investment Company A Stock 960 shares × $38.00 =$36,480 Company H Stock 1,900 shares × 28.80 = 54,720 Company R Stock 800 shares × 40.00 = 32,000 Company T Bonds $24,000 × 100% = 24,000 Total$147,200

Table (1)

Therefore, available-for-sale investment, (at cost), for Year 2 is $147,200. (b) Compute valuation allowance for available-for-sale investment, for Year 2. Step 1: Compute available-for-sale investment, (fair value), for Year 2.  Security Number of Shares (Or Face Amount) × Fair Value per Share (Or Bond Value) = Fair Value of Investment Company A Stock 960 shares ×$41.50 = $39,840 Company H Stock 1,900 shares × 26.00 = 49,400 Company R Stock 800 shares × 48.00 = 38,400 Company T Bonds$24,000 × 101% = 24,240 Total $151,880 Table (2) Step 2: Compute valuation allowance for available-for-sale investment, for Year 2.  Details Amount ($) Available-for-sale investments at fair value, December 31, (From Table-2) $151,880 Less: Available-for-sale investments at cost, December 31, (From Table-1) (147,200) Valuation allowance for available-for-sale investments$4,680

Table (3)

Therefore, valuation allowance for available-for-sale investment, for Year 2 is $4,680. (c) Compute available-for-sale investment, (fair value), for Year 2.  Security Number of Shares (Or Face Amount) × Fair Value per Share (Or Bond Value) = Fair Value of Investment Company A Stock 960 shares ×$41.50 = $39,840 Company H Stock 1,900 shares × 26.00 = 49,400 Company R Stock 800 shares × 48.00 = 38,400 Company T Bonds$24,000 × 101% = 24,240 Total $151,880 Table (4) Therefore, available-for-sale investment, (at fair value), for Year 2 is$151,880.

(d)

Compute interest receivable for Year 2.

Interest receivable = {Amount of debt investment × Rate of interest×Time period(October 1 to December 31)}= $24,000×4%×312=$240

Therefore, interest receivable for Year 2 is \$240

### Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

#### The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Find more solutions based on key concepts
Describe the eight elements of ERM.

Accounting Information Systems

What does the invisible hand of the marketplace do?

Essentials of Economics (MindTap Course List)