Reference no: EM132544415
Question - Stock Investment Transactions, Equity Method and Available-for-Sale Securities
Glacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31:
Year 1
Jan. 18. Purchased 8,600 shares of Malmo Inc. as an available-for-sale investment at $48 per share, including the brokerage commission.
July 22. A cash dividend of $0.50 per share was received on the Malmo stock.
Oct. 5. Sold 3,900 shares of Malmo Inc. stock at $53 per share less a brokerage commission of $40.
Dec. 18. Received a regular cash dividend of $0.50 per share on Malmo Inc. stock.
Dec. 31 Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $46 per share.
Use the valuation allowance for available-for-sale investments account in making the adjustment.
Year 2
Jan. 25. Purchased an influential interest in Helsi Co. for $560,000 by purchasing 35,000 shares directly from the estate of the founder of Helsi. There are 100,000 shares of Helsi Co. stock outstanding.
July 16. Received a cash dividend of $0.60 per share on Malmo Inc. stock.
Dec. 16. Received a cash dividend of $0.60 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock.
Dec. 31 Received $17,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $70,000 in Year 2.
Glacier Products Inc. uses the equity method of accounting for its investment in Helsi Co.
Dec. 31 Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $51 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $46 to $51 per share.
Required -
1. Journalize the entries to record the preceding transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. In your computations, round per share amounts to two decimal places.
2. Prepare the investment-related asset and stockholders' equity balance sheet presentation for Glacier Products Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is $409,000.
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