Delta-tec Inc.
Income Statement (selected items)
For the Year Ended December 31, 2014
Income from operations $299,700
Gain on sale of investments 17,800
Less unrealized loss on trading investments 72,500
Net income $245,000
The balance sheet dated December 31, 2013, showed a Retained Earnings balance of $825,000. During 2014, the company purchased trading investments for the first time at a cost of $346,000. In addition, trading investments with a cost of $66,000 were sold at
a gain during 2014. The company paid $65,000 in dividends during 2014.
a. Determine the December 31, 2014, Retained Earnings balance.
b. Provide the December 31, 2014, balance sheet presentation for Trading Investments.
Answer:
a. Retained earnings, December 31, 2013…………………………………………
Plus net income………………………………………………………………………
$ 825,000
245,000
$1,070,000
Less dividends……………………………………………………………………… 65,000
Retained earnings, December 31, 2014………………………………………… $1,005,000
b. Trading investments (at cost)*…………………………………………………… $ 280,000
Less valuation allowance for trading investments…………………………… 72,500
Trading investments (at fair value)……………………………………………… $ 207,500
* $346,000 – $66,000