Colorado Exchange Company completed the following long-term investment transactions during 2010: MAY 12- Purchased 18,200 shares, which make up 40% of the common stock of Brentwood Corporation at total cost of $330,000. JUL 9- Received annual cash dividend of $1.24 per share on the Brentwood investment. SEP 16- Purchased 900 shares of Bangkok, Inc., common stock as a available-for-sale investment, paying $42.00 per share. OCT 30-Received cash dividend of $0.33 per share on the Bangkok investment. DEC 31- Received annual report from Brentwood Corporation. Net income for the year was $530,000. At year-end the fair market value of the Bangkok stock is $30,300. The fair market value of the Brentwood stock is $655,000.
REQUIREMENTS:
(1) For which investment is fair market value used in the accounting? Why is fair market value used for one investment and not the other?
(2) Show what Colorado would report on its year-end balance sheet and income statement for these investment transactions. It is helpful to sue a T-account for the long-term investment in Brentwood stock account. Ignore income tax.