Brooks corp is a medium-sized corporation specializing in

Reference no: EM13598336

Brooks Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company's profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks has had a policy of investing idle cash in equity securities. I particular, Brooks has made periodic investments in the company's principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Brooks does not have significant influence over the operations of Norton Industries.
Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2010 year-end adjusting entries for the accounts that are valued by the "fair value" rule for financial reporting purposes. Thomas has gathered the following information about Brook's pertinent account.

1. Brooks has trading securities related to Delaney Motors and Patrick Electric. During this fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; these shares currently have a market value of $1,600,000. Brooks' investment in Patrick Electric has not been profitable; the company acquired 50,000 shares of Patrick in April 2010 at $20 per share, a purchase that currently has a value of $720,000.

2. Prior to 2010, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,500,000 on December 31, 2009. Brooks' 12% ownership of Norton Industries has a current market value of $22,225,000.

Instructions
(a)Prepare the appropriate adjusting entries for Brooks as of December 31, 2010, to reflect the application of the "fair value" rule for both classes of securities described above.
(b)For both classes of securities presented above, describe how the results of the valuation adjustments made in (a) would be reflected in the body of and notes to Brooks' 2010 financial statements.
(c) Prepare the entries for the Norton investment, assuming that Brooks owns 25% of Norton shares. Norton reported income of $500,000 in 2010 and paid cash dividends of $100,000..

Reference no: EM13598336

Questions Cloud

Spitfire company was incorporated on january 2 2011 but was : spitfire company was incorporated on january 2 2011 but was unable to begin manufacturing activities until july 1 2011

Suggest how your organizations business strategies : suggest how your organizations business strategies processes and culture are aligned with its ais. recommend two types

Evergreen company is manufacturing firm that uses job order : evergreen company is manufacturing firm that uses job order costing system. on january 1 the beginning of its fiscal

Compute the direct labor rate and efficiency variances for : sonne company produces a perfume called whim. the direct materials and direct labor standards for one bottle of whim

Brooks corp is a medium-sized corporation specializing in : brooks corp. is a medium-sized corporation specializing in quarrying stone for building construction. the company has

Garison music emporium carries a wide variety of musical : garison music emporium carries a wide variety of musical instruments sound reproduction equipment recorded music and

The school actually ran three courses with a total of 42 : the gourmand cooking school runs short cooking courses at its small campus. management has identified two cost drivers

A companys statement of cash flows shows its cash inflows : a companys statement of cash flows shows its cash inflows cash outflows and net change in cash from operating investing

Calculate the total dividends and the per-share dividends : southern star inc. manufactures and sells surfboards in florida georgia and the alabama. a publicly owned corporation

User Account

All Pages