12.
On October 10, 2010, Marcus Inc. buys trading securities with an original cost of $100,000. On December 31, 2010, they have a market value of $80,000. On March 9, 2011, those securities are sold for $120,000. Determine the gains or losses in 2010 and 2011 associated with these trading securities that will be reported on the income statement. Indicate whether the gains or losses are realized or unrealized.
13.On January 4, 2010, Harrison Corp. purchased 26% of C Corporation's voting stock for $100,000. During 2010, C recorded income of $200,000 and paid total dividends of $13,000. Harrison uses the cost method to account for this investment. Calculate Harrison’s income from the C investment and the December 31, 2010, balance sheet value of its long-term equity investment in C.
14.Before adjusting its current investments in equity securities, Apex Company has total current assets and current liabilities of $23,000 and $12,000, respectively. During the current year, Apex has net income of $200,000 with 50,000 shares of common stock outstanding. This amount excludes the effects of yearend adjustments related to the investments. Included in current assets are trading securities recorded at their original cost of $3,000. However, the current market value of those securities is $4,000 at yearend. If Apex properly accounts for trading securities, determine the effect on Apex’s current ratio and earnings per share.
15.On December 31, 2010, trading securities with an original cost of $100,000 have a market value of $109,000, and available-for-sale securities with an original cost of $45,000 have a market value of $60,000. It is management’s intent to hold the available for sale securities indefinitely. Fill in the partial balance sheet at December 31, 2010 provided below showing the results of the investments. Clearly label whether any gains or losses are realized or unrealized and clearly show the balance sheet classifications.
Balance Sheet at December 31, 2010:
Current Assets
Long-Term Assets
Shareholders’ Equity