On January 6, 2010, Miller Company acquired 4, 000 shares (or 10%)of Little Corporation's common stock at $28 per share.The securities are classified as available-for-sale investments.On October 24, 2010, Little declared and paid a cash dividend of $1 per share.On December 31, 2010, the market value of Little's common stock was $32 per share.Little also reported a net income of $200, 000 for 2010.At what value should Miller report the investment in Little's common stock on its December 31, 2010 balance sheet?

Question

Quizplus · Accepted Answer

The investment should be reported at its fair market value on the balance sheet date, which is $32 per share for 4,000 shares, totaling $128,000. Dividends received and changes in net income do not affect the reported value of available-for-sale securities on the balance sheet.

On January 6, 2010, Miller Company Acquired 4, 000 Shares