Question

1)

Richardson Corp.'s trading securities portfolio is as follows:
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Date: Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013
Stuart Inc. Fair value : $ 310,000 | 301,000 | 0
Stuart Inc. Cost : $ 190,000 | 190,000 | 0

Rufus Inc. Fair value : $ 295,000 | 0 | 0
Rufus Inc. Cost : $ 255,000 | 0 | 0
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No dividends were received from any investments. Ignoring income taxes, what amount should be reported as income in Richardson Corp. 2015 Income statement?

2)

Boston-Upp Corporation makes an equity-method investment in Wrap, Inc. at a purchase price of $4.1 million cash, representing 25% (at book value) of Wrap. During the year, Wrap reports net income of $1 million and Boston-Upp receives $900,000 of cash dividends from Wrap Inc. At the end of the year, the market value of Boston-Upp’s investment is $3.9 million.

At year end, what does Boston-Upp report on its balance sheet for its investment in Wrap Inc.?

		A) $4,035,000
		B) $4,100,000
		C) $4,125,000
		D) $3,450,000
		E) None of the above

Answer 1

Answer 1) The amount should be reported as income in Richardson Corp. 2015 Income statement is =$605,000($310,000+$295,000)[Refer Note 1]

Answer 2)The amount that Boston-Upp report on its balance sheet for its investment in Wrap Inc. is

B)4,100,000[Refer Note 2]

Note 1:The investment held for trading being reported as income in Richardson Corp. 2015 income statement at fair value income.

Note 2:The investment are reported in the balance sheet at the Purchase price .