O’Brien Industries Inc.
Balance Sheet
December 31, 2015 and 2014
Dec. 31, 2015 Dec. 31, 2014
Cash $233,000 $220,000
Accounts receivable (net) 136,530 138,000
Available-for-sale investments (at cost)—Note 1 a. 103,770
Less valuation allowance for available-for-sale investments b. 2,500
Available-for-sale investments (fair value) $ c. $101,270
Interest receivable $ d. —
Investment in Jolly Roger Co. stock—Note 2 e. $ 77,000
Office equipment (net) 115,000 130,000
Total assets $ f. $666,270
Accounts payable $ 69,400 $ 60,000
Common stock 70,000 70,000
Excess of issue price over par 225,000 225,000
Retained earnings g. 308,770
Unrealized gain (loss) on available-for-sale investments h. 2,500
Total liabilities and stockholders’ equity $ i. $666,270
Note 1. Investments are classified as available for sale. The investments at cost and
fair value on December 31, 2014, are as follows:
No. of Shares Cost per Share Total Cost Total Fair Value
Bernard Co. stock 2,250 $17 $ 38,250 $ 37,500
Chadwick Co. stock 1,260 52 65,520 63,770
$103,770 $101,270
Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding shares of Jolly Roger Co.
The following selected investment transactions occurred during 2015:
May 5. Purchased 3,080 shares of Gozar Inc. at $30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security.
Oct. 1. Purchased $40,000 of Nightline Co. 6%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1.
9. Dividends of $12,500 are received on the Jolly Roger Co. investment.
Dec. 31. Jolly Roger Co. reported a total net income of $112,000 for 2015. O’Brien Industries Inc. recorded equity earnings for its share of Jolly Roger Co. net income.
31. Accrued three months of interest on the Nightline bonds.
31. Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts:
Available-for-Sale
Investments Fair Value
Bernard Co. stock $15.40 per share
Chadwick Co. stock $46.00 per share
Gozar Inc. stock $32.00 per share
Nightline Co. bonds $98 per $100 of face amount
31. Closed the O’Brien Industries Inc. net income of $146,230 for 2015. O’Brien Industries Inc. paid no dividends during 2015.
Instructions
Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.
Answer:
a. $236,170 (see table below)
b. $(5,800) ($230,370 – $236,170, from table)
c. $230,370 (from table)
Market
Cost per Value per
No. of Share (or Share (or
Shares (or $100 of $100 of Total Fair
Investments face amount) face amount) face amount) Cost Value
Bernard Co. stock……… 2,250 $17.00 $15.40 $ 38,250 $ 34,650
Chadwick Co. stock… 1,260 52.00 46.00 65,520 57,960
Gozar Inc. stock……… 3,080 30.00 32.00 92,400 98,560
Nightline Co. bonds…… $40,000 100 98 40,000 39,200
$236,170 $230,370
d. $600 ($40,000 × 6% × 3/12)
e. $98,100 [$77,000 + ($112,000 × 30%) – $12,500]
f. $813,600 ($233,000 + $136,530 + $230,370 + $600 + $98,100 + $115,000)
g. $455,000 ($308,770 + $146,230)
h. $(5,800) [same as (b)]
i. $813,600 ($69,400 + $70,000 + $225,000 + $455,000 – $5,800)
The completed comparative unclassified balance sheets are as follows:
O'BRIEN INDUSTRIES, INC.
Balance Sheet
December 31, 2015 and 2014
Dec. 31,
2015
Dec. 31,
2014
Cash $233,000 $220,000
Accounts receivable (net) 136,530 138,000
Available-for-sale investments (at cost)—Note 1 $236,170 $103,770
Less valuation allowance for available-for-sale
investments 5,800 2,500
Available-for-sale investments (fair value) $230,370 $101,270
Interest receivable $ 600 —
Investment in Jolly Roger Co. stock—Note 2 98,100 $ 77,000
Office equipment (net) 115,000 130,000
Total assets $813,600 $666,270
Accounts payable $ 69,400 $ 60,000
Common stock 70,000 70,000
Excess of issue price over par 225,000 225,000
Retained earnings 455,000 308,770
Unrealized gain (loss) on available-for-sale
investments (5,800) 2,500
Total liabilities and stockholders’ equity $813,600 $666,270
Note 1. Investments are classified as available for sale. The investments at cost
and fair value on December 31, 2014, are as follows:
No. of Cost per Total Total Fair
Shares Share Cost Value
Bernard Co. stock………………………… 2,250 $17.00 $ 38,250 $ 37,500
Chadwick Co. stock……………………… 1,260 52.00 65,520 63,770
$103,770 $101,270
For December 31, 2015:
Market
Cost per Value per
No. of Share (or Share (or
Shares (or $100 of $100 of Total Fair
face amount) face amount) face amount) Cost Value
Bernard Co. stock…… 2,250 $17.00 $15.40 $ 38,250 $ 34,650
Chadwick Co. stock 1,260 52.00 46.00 65,520 57,960
Gozar Inc. stock……… 3,080 30.00 32.00 92,400 98,560
Nightline Co. bonds $40,000 100 98 40,000 39,200
$236,170 $230,370
Note 2. The investment in Jolly Roger Co. stock is an equity method