Asked by Seniha Elcik on Apr 25, 2024
Verified
On January 6, 2010, Miller Company acquired 4, 000 shares (or 10%) of Little Corporation's common stock at $28 per share.The securities are classified as available-for-sale investments.On October 24, 2010, Little declared and paid a cash dividend of $1 per share.On December 31, 2010, the market value of Little's common stock was $32 per share.Little also reported a net income of $200, 000 for 2010.At what value should Miller report the investment in Little's common stock on its December 31, 2010 balance sheet?
A) $112, 000
B) $128, 000
C) $133, 000
D) $153, 000
Available-for-Sale Investments
These are securities that are not classified as held-to-maturity or trading securities, and can be sold in the future.
Common Stock
Equity ownership in a corporation, providing voting rights and a share in the company’s profits through dividends.
- Comprehend and delineate the varied classifications of investments (trading, available-for-sale, held-to-maturity) and their corresponding accounting practices.
- Differentiate between types of equity securities that qualify as investments in securities and those that do not (for example, common stocks, preferred stocks, convertible bonds, stock options).
Verified Answer
CM
Camelia Maracle8 days ago
Final Answer :
B
Explanation :
The investment should be reported at its fair market value on the balance sheet date, which is $32 per share for 4,000 shares, totaling $128,000. Dividends received and changes in net income do not affect the reported value of available-for-sale securities on the balance sheet.
Learning Objectives
- Comprehend and delineate the varied classifications of investments (trading, available-for-sale, held-to-maturity) and their corresponding accounting practices.
- Differentiate between types of equity securities that qualify as investments in securities and those that do not (for example, common stocks, preferred stocks, convertible bonds, stock options).
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