Response to the following:
Using the data for Lyon Research Corporation in Exercise , assume that as of December 31, 2006, the M-Labs, Inc., stock had a market value of $28 per share and the Spectrum Corp. stock had a market value of $14 per share. For the year ending December 31, 2006, Lyon Research Corporation had net income of $80,000. Its tax rate is 40%.
a. Prepare the balance sheet presentation for the temporary investments.
b. Prepare a statement of comprehensive income presentation for the temporary investments.
Exercise :
During 2006, its first year of operations, Lyon Research Corporation purchased the following securities as a temporary investment:
Shares Cash Dividends
Security Purchased Cost Received
M-Labs, Inc. 1,000 $29,000 $ 900
Spectrum Corp. 2,500 45,000 1,600
a. Record the purchase of the temporary investments for cash.
b. Record the receipt of the dividends.