Question

an.	14		Purchased 200 shares of Robotic stock, paying $ 52 per share. The investment represents 3 %((that's what the book says)) ownership in Robotic's voting stock. Dollar Bill does not have significant influence over Robotic. Dollar Bill intends to hold the investment for the indefinite future.
Aug.	22		Received a cash dividend of $ 0.44 per share on the Robotic stock.
Dec.	31		Adjusted the investment to its current market value of $ 47 per share.
	31		Robotic reported net income of $350,000 for the year ended 2018. Classify and prepare a partial balance sheet and income statement for Dollar Bill Robotic investment as of December 31, 2018.

Answer 1

Hello,

Form the question what we understand here is

Robotic as a company and dollar bill as a person

first we note the effect of transaction taken place

1) here the outflow of cash from dollar bill to purchase shares in robotic is $52*200 Shares is $ 10,400 which is here assumed as capital of dollar bill (not clear but think it would on 14th April)

2) received cash dividend  from robotic i.e. $0.44*200 = $ 88 which will be treated as income and cash inflow of dollar bill

3) here the book entry done to adjust the share price to current book value i.e. $ 47 which will lead to reduce the shares value $ 5 per share which will lead to unrealised loss on shares for dollar bill i.e. $5*200 = $1,000

4) As income is reported by robotic so as per my decision their will not be any effect on dollar bill balance sheet and income statement due to treated as separate legal entity. if current FMV is changed then it could be adjusted otherwise not

Balance sheet(in $'s)

Capital & liabilities

Contribution of dollar bill - 10,400

Add;- Dividend earned - 88

Less:- unrealised loss on shares - 1000

Total capital at end = 9,488

Assets

-Shares of Robotic

Purchased - 10,400

less:- unrealised loss :- 1,000

total value at end = 9,400

- Cash Present = 88

Total assets at end = 9,488

Income statement

Income

Dividend - 88

Expenses - NIL

Net Income - 88

Unrealised loss in investment - 1,000

Net change in Capital = 88+(1,000) = (912) i.e. 10,400- 9,488

Thanks

Hope your query is solved