Question

Stock Investment Transactions, Equity Method and Available-for-Sale Securities

Glacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31:

Year 1
Jan. 18.	Purchased 5,800 shares of Malmo Inc. as an available-for-sale investment at $42 per share, including the brokerage commission.
July 22.	A cash dividend of $0.55 per share was received on the Malmo stock.
Oct. 5.	Sold 1,700 shares of Malmo Inc. stock at $46 per share less a brokerage commission of $40.
Dec. 18.	Received a regular cash dividend of $0.55 per share on Malmo Inc. stock.
Dec. 31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $40 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment.
Year 2
Jan. 25.	Purchased an influential interest in Helsi Co. for $720,000 by purchasing 31,500 shares directly from the estate of the founder of Helsi. There are 90,000 shares of Helsi Co. stock outstanding.
July 16.	Received a cash dividend of $0.65 per share on Malmo Inc. stock.
Dec. 16.	Received a cash dividend of $0.65 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock.
Dec. 31	Received $22,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $90,000 in Year 2. Glacier Products Inc. uses the equity method of accounting for its investment in Helsi Co.
Dec. 31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $46 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $40 to $46 per share.

1. Journalize the entries to record the preceding transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. In your computations, round per share amounts to two decimal places.

Date	Description	Debit	Credit
Year 1
Jan. 18.
July 22.
Oct. 5.
Dec. 18.
Dec. 31
Year 2
Jan. 25.
July 16.
Dec. 16.
Dec. 31-Dividends
Dec. 31-Income
Dec. 31-Valuation

Prepare the investment-related asset and stockholders’ equity balance sheet presentation for Glacier Products Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is $526,000.

Glacier Products, Inc. Balance Sheet (selected items) December 31, Year 2
Current Assets:
Investments:
Stockholders' Equity:

Answer 1

Date	Account Name	Debit	Credit
Year 1
Jan 18	Investments-Malmo Inc.	$243600
	Cash		$243600
Jul 22	Cash	3190
	Dividend revenue		3190
Oct 5	Cash[ (1700 x $46)-$40]	78160
	Investments-Malmo Inc. (1700 x $42)		71400
	Gain on sale of investments		6760
Dec 18	Cash (0.55 x 4100)	2255
	Dividend revenue		2255
Dec 31	Valuation Allowance for Available-for-Sale Investments	8200
	Investments-Malmo Inc​ (2 x 4100)		8200
Year 2
Jan 25	Investment in Helsi Co. Stock	720000
	Cash		720000
Jul 16	Cash ($0.65 x 4100)	2665
	Dividend revenue		2665
Dec 16	Cash ($0.8 x 4100)	3280
	Dividend revenue		3280
Dec 31	Investment in Helsi Co. Stock (90000x35%)	31500
	Income of Helsi Co.		31500
	Cash	22000
	Investment in Helsi Co. Stock		22000
Dec 31	Investments-Malmo Inc​ ($6 x 4100)	24600
	Valuation Allowance for Available-for-Sale Investments		24600

Balance sheet (selected items)

Current assets:
Investments-Malmo Inc (4100 x 42)	172200
Add: Valuation allowance for available for sale investments	16400
Total		$188600
Investments:
Investment in Helsi Co. Stock (720000+90000-22000)		788000
Stockholder's equity:
Retained earnings		526000
Unrealized gain on available for sale (4100 z 4)		16400