River Corporation, the investment banking company, often has extra cash to invest. Suppose River buys 600 shares

Question:

River Corporation, the investment banking company, often has extra cash to invest. Suppose River buys 600 shares of Eathen, Inc., stock at $40 per share. Assume River expects to hold the Eathen stock for one month and then sell it. The purchase occurs on December 15, 2010. At December 31, the market price of a share of Eathen stock is $48 per share.

Requirements
1. What type of investment is this to River? Give the reason for your answer.
2. Record Rivers purchase of the Eathen stock on December 15 and the adjustment to market value on December 31.
3. Show how River would report this investment on its at December 31 and any gain or loss on its income statement for the year ended December 31, 2010.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...