Question - Altruistic Company has an outstanding financial performance year, which generates excess cash of $2,000,000, which it chooses to purchase the following financial instruments on January 2, 2016:
(a) 5,000 shares of WF Enterprises with a market price of $28 per share; there are a total of 20,000 outstanding shares of WF Enterprises at the time of acquisition. This investment is categorized as trading. On December 31, 2016 the market price of WF Enterprises is $35 per share and net income of $80,000 for the year ended 12/31/2016 was announced. On February 15, 2017 a dividend of $3 per share was declared which was paid on March 15th. The market price as of 3/31/2017 is $38 per share.
(b) 7500 shares of Expediant Software with a market price of $16 per share; there are a total of $42,000 outstanding shares of Expediant Software at the time of acquisition. This investment is categorized as Available for sale. On December 31, 2016 the market price of Expediant Software is $14 per share and net income of $126,000 for the year ended 12/31/2016 was announced. On February 15, 2017 a dividend of $2 per share was declared which was paid on March 15th. The market price as of 3/31/2017 is $19 per share. Required:
A. Identify the journal entries required (i) 1/2/2016, (ii) 12/31/2016, and (iii) 3/15/2017 for:
a. The investment in WF Enterprises
b. The investment in Expediant Software
B. Identify the carrying value for each investment as of March 31, 2017