Problem:
Manhattan Co. purchased the following investments during 2007:
Date Stock Cost
Feb 1 Bourbon $80,000
Mar. 15 Turkey 20,000
June 10 Brandy 50,000
Sept. 12 J. Daniels 75,000
The company classifies investments in Bourbon and Daniels Co. as trading securities and the others as available for sale securities. At year-end the stocks had the following market values: Bourbon - $90,000, Turkey - $15,000, Brandy - $55,000, and Daniels Co. - $78,000.
In addition to the above, on January 1, Manhattan purchased 40% of Cherry Co. for $600,000. This purchase gave Manhattan significant influence over Cherry which during the year reported net income of $320,000 and they paid dividends of $40,000. The year-end market value of the investment was $620,000.
Indicate how the above investments would:
1) Affect the income statement for the year. (Be specific and give dollar amounts).
2) Be reported, and at what values, in the balance sheet.