Problem
Roman products, Inc. is a wholesaler of men hair products. the company began operations on Jan. 1, 2010. the following transactions relate to securities acquired by roman products inc. which has a fiscal year ending in Dec.31 2010.
Year 2010
jan.3 purchased 3000 shares of whalen inc. as an available for sale investment at $46 per share including the brokerage commission
july 6 split whalen inc. stock 2 for 1 and received the regular cash dividend of $0.60 per share on the whalen inc. stock after the split.
Oct. 14 sold 900 shares of whalen inc stock at $25 per share , less a brokerage commission of $50.
Dec. 9 Received the regular cash dividend of $0.60 per share .
Dec. 31 Whalen inc. is classified as an available for sale investment and is adjusted to fair value of $21 per share. Use the Valuation allowance for available for sale investment account in making the adjustment.
Year 2011
Jan 5 Purchased an influential interest in Tasmania co. for $620,000 by purchasing 60,000 shares directly from the estate of the founder of Tasmania . there are 150,000 share of Tasmania Co. stock outstanding .
July 8. received the regular cash divided of $0.70 per share on whalen inc. stock.
Dec.8. received the regular cash dividend of $0.70 per share plus an extra dividend of $0.15 per share on whalen inc. stock.
31 received $18,000 of cash dividends on Tasmania Co. stock Tasmania Co. reported net income of $74,000 in 2011. Roman products uses the equity method of accounting for its investment in Tasmania Co.
31. Whalen Inc. is classified as an available for sale investment and is adjusted to fair value of $26 per share. use the valuation allowance for available for sale investments account in making the adjustment.
Instructions:
1. Journalize the entries to record the preceding transactions.
2. Prepare the investment-related asset and stockholders' equity balance sheet disclosures for roman products inc. on December 31, 2011 assuming the retained earnings balance on December 31, 2011 is $455,000.