Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 32

Balance sheet presentation of available-for-sale investments
During Year 1, its first year of operations, Galileo Company purchased two available-forsale investments as follows:

Assume that as of December 31, Year 1, 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, Year 1. All of the available-for-sale investments are classified as current assets.
a. Prepare the Current Assets section of the balance sheet presentation for the availablefor- sale investments.
b. Prepare the Stockholders' Equity section of the balance sheet to reflect the earnings and unrealized gain (loss) for the available-for-sale investments.