During 2023, Elisabeth Ltd. purchased 8,000 shares of Lilly of the Valley Corp. for $34 per share ($272,000 total). Elisabeth held these shares until September 2025, when it sold them for $42 per share. During these three years, Lilly of the Valley paid dividends of $2 per share on July 31. On Elisabeth's fiscal year-end (December 31), shares of Lilly of the Valley closed at $39, $30, and $46 in 2023, 2024, and 2025, respectively. Required Assume that the company designated half of the Lilly of the Valley shares as FVPL and the other half irrevocably elected to record fair value changes through OCI. Determine the amounts to be reported on Elisabeth's balance sheet and statement of comprehensive income with respect to the company's investment in Lilly of the Valley Corp. What do you observe about the total amount of retained earnings for the three years combined? Complete the analysis for 2024.
During 2023, Elisabeth Ltd. purchased 8,000 shares of Lilly of the Valley Corp. for $34 per share ($272,000 total). Elisabeth held these shares until September 2025, when it sold them for $42 per share. During these three years, Lilly of the Valley paid dividends of $2 per share on July 31. On Elisabeth's fiscal year-end (December 31), shares of Lilly of the Valley closed at $39, $30, and $46 in 2023, 2024, and 2025, respectively. Required Assume that the company designated half of the Lilly of the Valley shares as FVPL and the other half irrevocably elected to record fair value changes through OCI. Determine the amounts to be reported on Elisabeth's balance sheet and statement of comprehensive income with respect to the company's investment in Lilly of the Valley Corp. What do you observe about the total amount of retained earnings for the three years combined? Complete the analysis for 2024.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Transcribed Image Text:During 2023, Elisabeth Ltd. purchased 8,000 shares of Lilly of the Valley Corp. for $34 per share ($272,000 total). Elisabeth held these shares until
September 2025, when it sold them for $42 per share. During these three years, Lilly of the Valley paid dividends of $2 per share on July 31. On
Elisabeth's fiscal year-end (December 31), shares of Lilly of the Valley closed at $39, $30, and $46 in 2023, 2024, and 2025, respectively.
Required
Assume that the company designated half of the Lilly of the Valley shares as FVPL and the other half irrevocably elected to record fair value changes
through OCI. Determine the amounts to be reported on Elisabeth's balance sheet and statement of comprehensive income with respect to
the company's investment in Lilly of the Valley Corp. What do you observe about the total amount of retained earnings for the three years combined?
Complete the analysis for 2024.
Balance sheet
Financial asset
Equity: AOCI on Lilly of the Valley shares*
Retained earnings due to gains or losses (cumulative)
Retained earnings from dividend income (cumulative)
Statement of comprehensive income
Dividend income
Gains (losses) recognized through income
Gains (losses) recognized through OCI
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