On February 1, 2016, Lee Co. decides to invest excess cash of $21,000 by purchasing 1,400 shares of Hart, Inc. stock at $15 per share. At year-end, December 31, 2016, Hart’s market price was $19 per share. The investment is categorized as a trading investment.
Requirements
1. Journalize the transactions for Lee’s investment in Hart, Inc. for 2016.
2. In what category and at what value would Lee report the asset on the December 31, 2016, balance sheet? In what account would the market price change in Hart’s stock be reported, if at all?
3. What was the net effect of the investment on Lee’s net income for the year ended December 31, 2016?