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The income statement for Delta-tec Inc. for the year ended December 31, Year 2, was as follows:
Income from operations $299,700
Gain on sale of investments 17,800
Unrealized loss on trading investments (72,500)
Net income $245,000
The balance sheet dated December 31, Year 1, showed a Retained Earnings balance of $825,000. During Year 2, the company purchased trading investments for the first time at a cost of $346,000. In addition, trading investments with a cost of $66,000 were sold at a gain during Year 2. The company paid $65,000 in dividends during Year 2.

a. Determine the December 31, Year 2, Retained Earnings balance.
b. Provide the December 31, Year 2, balance sheet disclosure for Trading Investments

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Karabo99

Answer and Explanation:

a.

Retain earnings, year 2

= retained earnings year 1 + earning for year 2

= $825,000 + ($245,000 - $65,000)                                      

= $825,000 + $180,000

= $1,005,000

Therefore, The December 31, Year 2, Retained Earnings balance is $1,005,000.

b.

trading inverstments are classified under current assets. the closing balance of trading inverstments is:

trading inverstments purchased at cost in year 2        $346,000

trading inverstments sold at cost in year 2                   $66,000

balance of trading inverstments at cost                        $280,000

The balance sheet is present like:

                        D-Tec Inc

                    balance sheet

particulars                                                                    amount($)

current asstes                                        

trading inverstments(at cost)                                      280,000

valuation allowance for trading inverstment             (72,500)

trading inverstments(at fair value)                               207,500

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