Asked by Victoria Rojas on Jul 15, 2024
Verified
During the first year of operations, Makala Company purchased two trading investments as follows: Assume that as of December 31, the Oceanna Company stock had a market value of $49 per share and Rockledge, Inc. stock had a market value of $20 per share. Makala had 10,000 shares of no-par stock outstanding that was issued for $150,000. For the year ending December 31, Makala had net income of $105,000. No dividends were paid.
(a)Prepare the current assets section of the balance sheet presentation for the trading securities as of December 31.(b)Explain how the gain or loss would be reported on the income statement.
Trading Investments
Securities bought and held primarily for selling them in the near term to generate income on short-term price differences.
Market Value
The current price at which an asset or service can be bought or sold in a market, reflecting its perceived value by participants.
Balance Sheet
A financial report that presents the assets, liabilities, and shareholders' equity of a company at a specific time.
- Learn the procedures for treatment and reporting of trading securities on financial statements.
- Master the approach for recording investment value adjustments to fair value and their repercussions on financial statements.
Verified Answer
Learning Objectives
- Learn the procedures for treatment and reporting of trading securities on financial statements.
- Master the approach for recording investment value adjustments to fair value and their repercussions on financial statements.
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