During 2016, its first year of operations, Galileo Company purchased two availab

Question

During 2016, its first year of operations, Galileo Company purchased two available-for-sale investments as follows:

Assume that as of December 31, 2016, the Hawking Inc. stock had a market value of $50 per share, and the Pavlov Co. stock had a market value of $24 per share. Galileo Company had net income of $300,000, and paid no dividends for the year ended December 31, 2016. All of the available-for-sale investments are classified as current assets.

Security Shares Purchased Cost Hawking Inc. 900 $44,000 Pavlov Co. 1,780 38,000

Explanation / Answer

A.

B.

$ $ Current Assets: Available for sale investments: Hawking Inc            Cost 44000                             + Unrealized gain 1000 45000 Pavlov Co.              Cost 38000                              + Unrealized gain 4720 42720

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