Ashley Company Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd,Inc.'s common stock for $60,000 on January 1,2010.During 2010,Judd declared a dividend of $5 per share and reported net income of $75,000.At the end of 2010 the market value of a share of Judd,Inc.stock has increased to $32 per share.
If Ashley Company accounts for the investment as a minority,passive investment and classifies it as a available-for-sale security the investment will appear in the December 31,2010 balance sheet at what amount?

Question

Quizplus · Accepted Answer

As per the question, Ashley Company purchased 2,000 shares of Judd, Inc. for $60,000, which means the purchase price per share was $30 ($60,000/2,000). Since the investment is classified as an available-for-sale security, any change in the market value will be reflected in comprehensive income. Therefore, the increase in the market value of $2 per share ($32 - $30) will add $4,000 (2,000 shares x $2) to the comprehensive income.

The total value of the investment will be calculated by adding the purchase price and the comprehensive income, which is $60,000 + $4,000 = $64,000. Hence, the correct answer is C) $64,000.

Ashley Company Ashley Company Purchased 2,000 of the 10,000 Outstanding