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8 March, 10:09

During Year 1, its first year of operations, Galileo Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Hawking Inc. 750 $33,375 Pavlov Co. 2,030 47,096 Assume that as of December 31, Year 1, the Hawking Inc. stock had a market value of $53 per share and the Pavlov Co. stock had a market value of $42 per share. Galileo Company had net income of $258,300 and paid no dividends for the year ending December 31, Year 1. All of the available-for-sale investments are classified as current assets. a. Prepare the Current Assets section of the balance sheet presentation for the available-for-sale investments.

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  1. 8 March, 10:18
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    See the explanation below.

    Explanation:

    The data in the question are merged and they are separated first before the question is answered as follows:

    Security Shares Purchased Cost ($)

    Hawking Inc. 750 33,375

    Pavlov Co. 2,030 47,096

    The answers and explanation are now as follows:

    Hawking Inc. market value = $53 * 750 = $39,750

    Pavlov Co. market value = $42 * 2,030 = $85,260

    Total market value stock = $125,010

    Total cost of stock = $33,375 + 47,096 = $80,471

    Unrealized gain from stock = Market value - Cost = $125,010 - $80,471 = $44,539

    Galileo Company

    Balance Sheet (Selected Items)

    December 31, Year 1.

    Details Amount ($)

    Current Assets:

    Available-for-sale investments, at Cost. 80,471

    Valuation allowance for available-for-sale investments 44,539

    Total 125,010
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