Company owner Abel Terrio has reviewed the 2011 financial statements you
prepared for Jackson Company as the accountant, and questions the $6,000 loss
reported on the sale of its investment in Blackhawk Co. common stock.
Jackson acquired 50,000 shares of Blackhawk's common stock on December 31,
2009, at a cost of $500,000. This stock purchase represented a 40% interest in
Blackhawk. The 2010 income statement reported that earnings from all
investments were $126,000.
On January 3, 2011, Jackson Company sold the Blackhawk stock for $575,000.
Blackhawk did not pay any dividends during 2010 but reported a net income of
$202,500 for that year. Terrio believes that because the Blackhawk stock
purchase price was $500,000 and was sold for $575,000, the 2011 income
statement should report a $75,000 gain on the sale.
Draft a one-half page memorandum (at least 2 paragraphs) to Terrio
explaining why the $6,000 loss on sale of Blackhawk stock is correctly
You will be graded on how well you address the questions. Addressing the
questions involves identifying relevant facts, applying the chapter concepts,,
and answering each question completely.
Proper APA formatting is expected and required (cited sources, reference
page, etc.). Supplement and synthesize
your analysis with outsides scholarly sources.
For assistance with APA citations, please visit the following links: The
American Psychological Association Website:http://www.apastyle.org/
The APA site has numerous links (see “most popular”), but you may want to
view the tutorial if you are completely new to APA: http://www.apastyle.org/learn/tutorials/basics-tutorial.aspx
Note: This assignment will be
submitted for plagiarism detection. .