On June 1, 2016, Rick’s Restaurant decides to invest excess cash of $41,800 from the tourist season by purchasing 2,200 shares of Bison, Inc. stock at $ 19 per share. At year-end, December 31, 2016, Bison’s market price was $15 per share. The investment is categorized as an available-for-sale investment and will be held for the short-term.
Requirements
1. Journalize the transactions for Ricks investment in Bison, Inc. for 2016.
2. In what category and at what value would Rick report the asset on the December 31, 2016, balance sheet? In what account would the market price change in Bison’s stock be reported, if at all?
3. What was the net effect of the investment on Rick’s net income for the year ended December 31, 2016?