The following transactions and information pertain to Brown Co long term investments during 2015 and 2016 . Brown did not own any long term investments prior to 2015.
· Show the appropriate journal entries for each transactions in good form (show your computations if you need to calculate a number for the journal entry)
· Show the relevant portions of each year’s balance sheet and income statement that reflects these transactions for both 2015 and 2016
2015
Sept 9 Purchased 1,000 shares of Packard, Inc. common stock for $80,000 cash.. These shares represent 30% of Packard’s outstanding share.
Oct 2 Purchased 2,000 shares of AT&T common stock for $60,000 cash. These shares represent less than 1% ownership in AT&T.
Oct 17 Purchased as a long term investment 1,000 shares of Apple Computer common stock for $40,000 cash. These shares are less than 1% of Apple’s outstanding shares.
Nov 1 Received $5,000 cash dividend from Packard.
Nov 30 Received $3,000 cash dividend from AT&T.
Dec 15 Received $1,400 cash dividend from Apple.
Dec 31 Packard’s 2015 net income is $70,000.
Dec 31 Market values for the investments in equity securities are Packard $84,000; AT&T $48,000; and Apple Computer $45,000.
Dec 31 For preparing financial statements, note the following post-closing account balances: Common Stock, $500,000 and Retained Earnings $350,000.
2016
Jan 1 Sold Packard, Inc. shares for $108,000 cash.
May 30Received $3,100 cash dividend from AT&T.
June 15Received $1,600 cash dividend from Apple.
Aug 17 Sold the AT&T stock for $52,000 cash.
Aug 19 Purchased 2,000 shares of Coca Cola common stock for $50,000 cash as a long term investment. The stock represents less than a 5% ownership in Coca Cola.
Dec 15 Received $1,800 cash dividend from Apple.
Dec 31 Market values for the investments in equity securities are Apple Computer $39,000 and Coca Cola $48,000.
Dec 31 For preparing financial statements, note the following post-closing account balances: Common Stock, $500,000 and Retained Earnings $410,000.
Tips:
· Account for the investment in Packard under the equity method.
· Account for the investments in AT&T, Apple and Coca Cola as long term investments in available for sale.
· Prepare the information for the two years balance sheets by including the appropriate asset and equity accounts.
· List the relevant income statement items with account name and balance for each year.
