6. EX.15-23.ALGO (Algorithmie) Balance Sheet Presentation of Available-for-Sale

Question

6. EX.15-23.ALGO (Algorithmie) Balance Sheet Presentation of Available-for-Sale Investments e Year i, its first year of operations, Galileo Company purchased two available-for-sale investments as follows: Security Shares Purchased Hawking Inc Pavlov Co. 940 2,550 Cost $52,546 74,205 Assume that as of December 31, Year 1, the Hawking Inc, stock had a market value of $67 per share and the Paviov Co. stock had a market value of $53 per share. Gileo Company had net income of $406,900, Page 6 of 7 and paid no dividends for the year ending December 31, Year 1. All of the evailable-for-sale investments are class fied as current assets. a. Prepare the Current Assets section of the balance sheet presentation for the availiable-for-sale Galileo Company Balance Sheet (selected tems) December 31, Year1 Assets Current Assets: b. Prepare re the Stockhoiders' Equity section of the balance sheet to reflect the earnings and unrealized ain (loss) for the available-for-sale investments. Galileo Company Balance Sheet (selected Stockholders Equity items) December 31, Year1 Stockholders Equity

Explanation / Answer

a) Galileo Company Balance Sheet (selected items) December 31, Year 1 Assets Current assets: Available-for-sale investments, at cost ($52,546 + $74,205) $126,751.00 Plus valuation allowance for available-for-sale Investments $71,379.00 $198,130.00 Hawking Inc. ((940 Shares x $67) $62,980.00 Pavlov Co.(2550 x $53) $135,150.00 Total Market Value $198,130.00 Less Cost $126,751.00 Unrealized Gain $71,379.00 b) Galileo Company Balance Sheet (selected items) December 31, Year 1 Shareholders' Equity Retained Earnings $406,900.00 Unrealized gain (loss) on available-for-sale investments $71,379.00

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