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What was net effect of the investment on Rick net income

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Reference no: EM132917735

Question -

Assume Intervale Railway is considering investing in Pale Co. stock for three months. The investment will represent 5% of the voting stock of Pale Co. How would the investment be classified?

Which of the following investments is most likely classified as a held-to-maturity debt investment?

-100% ownership in voting stock of a supplier

-10-year bonds

-80% stock ownership in a subsidiary

-None of the above

On January 1, 2024, the Cook's Restaurant decides to invest in Lake Goodlock bonds. The bonds mature on December 31, 2031, and pay interest on June 30 and December 31 at 6?% annually. The market rate of interest was 6% on January 1, 2024, so the $50,000 maturity value bonds sold for face value. Cook's intends to hold the bonds until December 31, 2031.

-Journalize the transactions related to Cook's investment in Lake Goodlock bonds during 2024.

-In what category would Cook's report the investment on the December 31, 2024, balance sheet?

On January 1, 2024, Rose Company invests $21,000 in Fruits, Inc. stock. Fruits pays Rose a $700 dividend on August 1, 2024. Rose sells the Fruits' stock on August 31, 2024, for $21,150. Assume the investment is categorized as a short-term equity investment and Rose Company does not have significant influence over Fruits, Inc

-Journalize the transactions for Rose's investment in Fruits' stock.

-What was the net effect of the investment on Rose's net income for the year ended December 31, 2024?

On January 1, 2024, Wallace, Inc. decides to invest in 7,000 shares of Gelding stock when the stock is selling for $15 per share. On May 1, 2024, Gelding paid a $0.40 per share cash dividend to stockholders. On December 31, 2024, Gelding reports net income of $130,000 for 2024. Assume Gelding has 20,000 shares of voting stock outstanding during 2024 and Wallace has significant influence over Gelding.

-Identify what type of investment the Gelding stock is for Wallace.

-Journalize the transactions related to Wallace's investment in the Gelding stock during 2024.

-In what category and at what value would Wallace's report the investment on the December 31, 2024, balance sheet?

On July 1, 2024, Rick's Restaurant decides to invest excess cash of $55,200 from the tourist season by purchasing a Buffalo, Inc. bond at face value. At year-end, December 31, 2024, Buffalo's bond had a market value of $52,400. The investment is categorized as an available-for-sale debt investment and will be held for the short-term.

-Journalize the transactions for Rick's investment in Buffalo, Inc. for 2024.

-In what category and at what value would Rick report the asset on the December 31, 2024, balance sheet? In what account would the market price change in Buffalo's stock be reported, if at all?

-What was the net effect of the investment on Rick's net income for the year ended December 31, 2024?

Reference no: EM132917735

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