Durham Company often purchases common stocks of other companies as long term investments. At the end of 2002, Durham held the common stocks listed. (Assume that Durham Company exercises no significant influence over these companies; that is, they are classified as available for sale securities.)
|
Number of |
Cost |
|
|
Corporation |
Shares |
per Share |
|
A |
2,000 |
$ 70 |
|
B |
3,000 |
50 |
|
C |
1,500 |
148 |
|
D |
1,000 |
82 |
Additional information for 2002:
Sep. 30 Durham received a cash dividend of $2.50 per share on Corporation A stock.
Dec. 31 The market prices were quoted as follows:
Corporation A stock, $64; Corporation B stock, $48;
Corporation C stock, $150; Corporation D stock, $78.
Required
1. Illustrate how these investments would be reported on the balance sheet at December 31, 2002, and prepare the adjusting entry at that date.
2. What items and amounts would be reported on the income statement for 2002?
3. Prepare the journal entry for the sale of Corporation D stock for $74 per share in 2003.
4. Interpretive Question: Why are losses from the write down of available for sale securities not included in the current year’s income, whereas similar losses for trading securitiesare included?