Question 1: (Financial Statement Presentation of Available-for-Sale Investments) Woolford Company has the following portfolio of available-for-sale securities at December 31, 2003.
Per Share
Security Quantity Percent Interest Cost Market
Favre, Inc. 2,000 shares 8% $11 $16
Walsh Corp. 5,000 shares 14% 23 17
Dilfer Company 4,000 shares 2% 31 24
Instructions:
a. What should be reported on Woolford's December 31, 2003, balance sheet relative to these long-term available-for-sale securities?
On December 31, 2004, Woolford's portfolio of available-for-sale securities consisted of the following common stocks.
Per Share
Security Quantity Interest Percent Cost Market
Walsh Corp. 5,000 shares 14% $23 $30
Dilfer Company 4,000 shares 2% 31 23
Dilfer Company 2,000 shares 1% 25 23
At the end of year 2004, Woolford Company changed its intent relative to its investment in Favre, Inc. and reclassified the shares to trading securities status when the shares were selling for $9 per share.
b. What should be reported on the face of Woolford's December 31, 2004, balance sheet relative to available-for-sale securities investments? What should be reported to reflect the transactions above in Woolford's 2004 income statement?
c. Assuming that comparative financial statements for 2003 and 2004 are presented, draft the footnote necessary for full disclosure of Woolford's transactions and position in equity securities.