The following transactions relate to Brown Company’s long term investments during 2010 and 2011. Brown did not own any long term investments prior to 2010. Show (1) the appropriate journal entries and (2) the relevant portions of each year’s balance sheet and income statement that reflect these transactions for both 2010 and 2011.
2010
Sept. 9 Purchased 1,000 shares of Packard, Inc., common stock for $80,000 cash. These shares represent 30% of Packard’s outstanding shares.
Oct. 2 Purchased 2,000 shares of AT&T common stock for $60,000 cash as a long term investment.
These shares represent less than a 1% ownership in AT&T. 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.
30 Received $3,000 cash dividend from AT&T.
Dec. 15 Received $1,400 cash dividend from Apple.
31 Packard’s net income for this year is $70,000.
31 Fair values for the investments in equity securities are Packard, $84,000; AT&T, $48,000; and Apple Computer, $45,000.
31 For preparing financial statements, note the following post closing account balances: Common Stock, $500,000, and Retained Earnings, $350,000.
2011
Jan. 1 Sold Packard, Inc., shares for $108,000 cash.
May 30 Received $3,100 cash dividend from AT&T.
June 15 Received $1,600 cash dividend from Apple.
Aug. 17 Sold the AT&T stock for $52,000 cash.
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.
31 Fair values of the investments in equity securities are Apple, $39,000, and Coca Cola, $48,000.
31 For preparing financial statements, note the following post closing account balances: Common Stock, $500,000, and Retained Earnings, $410,000.