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Compute the 2011 and 2012 income effects

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Reference no: EM131410845

On October 18, 2011, Daley Inc. purchased 100 shares of Orthon at $32 per share. The investment was classified as available-for-sale securities. The shares were held throughout the remainder of 2011 and 2012, and by December 31, 2011 and 2012, the per-share market price had risen to $40 and $50, respectively. On December 31, 2012, Daley decided to change the classification from available-for-sale to trading securities.

REQUIRED:

a. Provide the journal entries recorded at October 18, 2011; December 31, 2011; and December 31, 2012.

b. Assume that the investment was originally classified as trading securities and then changed to available-for-sale on December 31, 2012. Provide the journal entries recorded at October 18, 2011; December 31, 2011; and December 31, 2012.

c. Compute the 2011 and 2012 income effects under the two assumptions

Reference no: EM131410845

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