Homework Answers
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Part A
|
GALILEO
COMPANY |
||
|
Assets |
||
|
Current assets: |
||
|
Trading investments, at cost |
82000 |
|
|
Plus: valuation allowance for Trading investments |
5720 |
$87720 |
Fair value
Hawking Inc.= 50*900 = 45000
Pavlov Co. = 24*1780 = 42720
Total fair value = 87720
Total cost = 44000+38000 = 82000
Unrealized gain = 87720-82000 = 5720
Part 2
The unrealized gain on trading investments is reported on the income statement and added in determining stockholders’ equity. Because is unrealized gain is closed to an income statement, the unrealized gain will increase net income
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