broadway arts inc produces and sells theater set designs and 255331

Broadway Arts Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 2010. The following transactions relate to securities acquired by Broadway Arts Inc., which has a fiscal year ending on December 31:

2010

Jan. 10. Purchased 5,000 shares of Crystal Inc. as an available-for-sale security at $36 per share, including the brokerage commission.

Mar. 12. Received the regular cash dividend of $0.80 per share.

Sept. 9. Split Crystal Inc. stock 2 for 1 and received the regular cash dividend of $0.40 per share on the Crystal Inc. stock.

Oct. 14. Sold 1,000 shares of Crystal Inc. stock at $15 per share, less a brokerage commission of $100.

Dec. 31. Crystal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $19 per share. Use the Valuation Allowance for

Available-for-Sale Investments account in making the adjustment.

2011

Jan. 5. Purchased an influential interest in Bulls Eye Inc. for $410,000 by purchasing 50,000 shares directly from the estate of the founder of Bulls Eye Inc.

There are 200,000 shares of Bulls Eye Inc. stock outstanding.

Mar. 8. Received the regular cash divided of $0.45 per share on Crystal Inc. stock.

Sept. 10. Received the regular cash dividend of $0.45 per share plus an extra dividend of $0.10 per share on Crystal Inc. stock.

Dec. 31. Received $35,000 of cash dividends on Bulls Eye Inc. stock. Bulls Eye Inc. reported net income of $126,000 in 2011. Broadway Arts Inc. uses the equity method of accounting for its investment in Bulls Eye Inc.

31. Crystal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $15 per share. Use the Valuation Allowance for

Available-for-Sale Investments account in making the adjustment.

Instructions

1. Journalize the entries to record these transactions.

2. Prepare the investment-related asset and stockholders’ equity balance sheet disclosures for Broadway Arts Inc. on December 31, 2011, assuming the Retained Earnings balance on December 31, 2011, is $390,000.

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