ACCT I S 100 Chapter Notes - Chapter Appendix E: Income Statement, A Question Of Balance, Financial Statement
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Selected transactions completed by Equinox Products Inc. duringthe fiscal year ended December 31, 2016, were as follows:
Record on journal page 10:
Jan. | 3 | Issued 15,000 shares of $20 par common stock at $30, receivingcash. |
Feb. | 15 | Issued 4,000 shares of $80 par preferred 5% stock at $100,receiving cash. |
May | 1 | Issued $500,000 of 10-year, 5% bonds at 104, with interestpayable semiannually. |
16 | Declared a dividend of $0.50 per share on common stock and$1.00 per share on preferred stock. On the date of record, 100,000shares of common stock were outstanding, no treasury shares wereheld, and 20,000 shares of preferred stock were outstanding.Journalize this transaction as a single entry. | |
26 | Paid the cash dividends declared on May 16. | |
Jun. | 1 | Purchased 7,500 shares of Solstice Corp. at $40 per share, plusa $150 brokerage commission. The investment is classified as anavailable-for-sale investment. |
8 | Purchased 8,000 shares of treasury common stock at $33 pershare. | |
22 | Purchased 40,000 shares of Pinkberry Co. stock directly fromthe founders for $24 per share. Pinkberry has 125,000 shares issuedand outstanding. Equinox Products Inc. treated the investment as anequity method investment. | |
30 | Declared a $1.00 cash dividend per share on preferred stock. Onthe date of record, 20,000 shares of preferred stock wereoutstanding. | |
Jul. | 11 | Paid the cash dividends declared on Jul. 11 to the preferredstockholders. |
Aug. | 27 | Received $27,500 dividend from Pinkberry Co. investment of Jun.22. |
Record on journal page 11:
Oct. | 1 | Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directlyfrom the issuing company, at their face amount plus accruedinterest of $375. The bonds are classified as a held-to-maturitylong-term investment. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7 | Sold, at $38 per share, 2,600 shares of treasury common stockpurchased on Jun. 8. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 | Received a dividend of $0.60 per share from the Solstice Corp.investment on Jun. 1. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
29 | Sold 1,000 shares of Solstice Corp. at $45, includingcommission. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31 | Recorded the payment of semiannual interest on the bonds issuedon May 1 and the amortization of the premium for six months. Theamortization is determined using the straight-line method. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec. | 31 | Accrued interest for three months on the Dream Inc. bondspurchased on Oct. 1. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31 | Pinkberry Co. recorded total earnings of $240,000. EquinoxProducts recorded equity earnings for its share of Pinkberry Co.net income. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
31 | The fair value for Solstice Corp. stock was $39.02 per share onDecember 31, 2016. The investment is adjusted to fair value, usinga valuation allowance account. Assume Valuation Allowance forAvailable-for-Sale Investments had a beginning balance of zero.
1. Journalize the selected transactions. Refer to the Chart ofAccounts for exact wording of account titles. Scroll down forjournal page 11. Journal 10
Journal 11
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Hurricane Inc. purchased a portfolio of available-for-sale securities in 2016, its first year of operations. The cost and fair value of this portfolio on December 31, 2016, was as follows:
1 | Name | Number of Shares | Total Cost | Total Fair Value |
2 | Tornado Inc. | 830.00 | $14,857.00 | $16,185.00 |
3 | Tsunami Corp. | 1,230.00 | 31,488.00 | 34,809.00 |
4 | Typhoon Corp. | 2,170.00 | 44,268.00 | 43,834.00 |
5 | Total | $90,613.00 | $94,828.00 |
On June 12, 2017, Hurricane purchased 1,400 shares of Rogue Wave Inc. at $50 per share plus a $80 brokerage commission.
Required:
A. | Provide the journal entries to record the following (refer to the Chart of Accounts for exact wording of account titles and be sure to enter the year as part of the date):
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B. | How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities? |
Chart of Accounts
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hurricane Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Journal
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A. Provide the journal entries. Refer to the Chart of Accounts for exact wording of account titles. Be sure to enter the year as part of the date.
How does grading work?
PAGE 10
JOURNAL
Score: 33/51
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | |
---|---|---|---|---|---|
1 | ? | ? | |||
2 | ? | ||||
3 | ? | ? | |||
4 | ? |
Points:
6.47 / 10
Feedback
Check My Work
1. The gain or loss is the difference between the portfolio cost and its fair value. The offset account for the gain or loss entry is the valuation allowance account.
2. Increase the investment and decrease Cash for the purchase price (Shares x Per share amount) plus brokerage fee.
Final Question
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B. How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities?
Unrealized gains and losses for available-for-sale securities are accumulated over time and reported as a credit (positive) or debit (negative) balance in the Stockholdersâ Equity section. As a result, the changes in fair valueare not reflected on the income statement, as is the case with trading securities. Bypassing the income statement issupported on the grounds that available-for-sale securities will be held for alonger time than trading securities; thus, fluctuations in market prices havea greater opportunity to âcancel outâ over time.
Points:
5 / 5
1) On January 4, Year 1, Barber Company purchased 7,500 sharesof Convell Company for $84,500 plus a broker's fee of $1,500.Convell Company has a total of 37,500 shares of common stockoutstanding and it is presumed the Barber Company will have asignificant influence over Convell. During each of the next twoyears, Convell declared and paid cash dividends of $0.85 per share,and its net income was $97,000 and $92,000 for Year 1 and Year 2,respectively. What is the book value of Barber's investment inConvell at the end of Year 2?
A) $111,050.
B) $86,000.
C) $122,800.
D) $73,250.
E) $123,800.
2) The accountant for Crusoe Company is preparing the company'sstatement of cash flows for the fiscal year just ended. Thefollowing information is available:
Retained earningsbalance at the beginning of the year | $ | 128,500 |
Cash dividends declared for theyear | 48,500 | |
Proceeds from the sale ofequipment | 83,500 | |
Gain on the sale ofequipment | 7,500 | |
Cash dividends payable at thebeginning of the year | 20,500 | |
Cash dividends payable at theend of the year | 23,000 | |
Net income for the year | 94,500 | |
The amount of cash dividends paid during the year would be:
A) $253,000.
B) $179,000.
C) $46,000.
D) $258,500.
E) $281,000.
3) On February 15, Jewel Company buys 6,500 shares of MarceloCorp. common stock at $28.68 per share plus a brokerage fee of$475. The stock is classified as long-term available-for-salesecurities. This is the companyâs first and only investment inavailable-for-sale securities. On March 15, Marcelo declares adividend of $1.30 per share payable to stockholders of record onApril 15. Jewel received the dividend on April 15 and ultimatelysells half of the Marcelo stock on November 17 of the current yearfor $29.45 per share less a brokerage fee of $325. The journalentry to record the purchase on February 15 is:
A) Debit Long-Term Investments-AFS $186,420; credit Cash$186,420.
B) Debit Long-Term Investments-Trading $186,895; credit Cash$186,895.
C) Debit Long-Term Investments-HTM $191,425; credit cash$191,425.
D )Debit Long-Term Investments-AFS $186,895; credit Cash$186,895.
E) Debit Long-Term Investments-Trading $186,420; credit Cash$186,420.
4) Jeffreys Company reports depreciation expense of $58,000 forYear 2. Also, equipment costing $194,000 was sold for a $11,800loss in Year 2. The following selected information is available forJeffreys Company from its comparative balance sheet. Compute thecash received from the sale of the equipment.
At December 31 | Year 2 | Year 1 | ||||
Equipment | $ | 700,000 | $ | 894,000 | ||
AccumulatedDepreciation-Equipment | 500,000 | 590,000 |
A) $57,800.
B) $34,200.
C) $78,200.
D) $46,000.
E) $58,000.
5) Use the following information to compute the cost of goodsmanufactured. Assume that all raw materials used were traceable tospecific units of product.
Beginning rawmaterials | $ | 6,700 | |
Ending raw materials | 5,200 | ||
Direct labor | 13,450 | ||
Raw material purchases | 8,600 | ||
Depreciation on factoryequipment | 7,700 | ||
Factory repairs andmaintenance | 4,500 | ||
Beginning finished goodsinventory | 11,400 | ||
Ending finished goodsinventory | 10,100 | ||
Beginning work in processinventory | 6,900 | ||
Ending work in processinventory | 7,500 |
A) $35,750.
B) $35,150.
C) $36,650.
D) $36,350.
E) $42,650.
6) Memphis Company anticipates total sales for April, May, andJune of $830,000, $930,000, and $980,000 respectively. Cash salesare normally 30% of total sales. Of the credit sales, 30% arecollected in the same month as the sale, 65% are collected duringthe first month after the sale, and the remaining 5% are collectedin the second month. Compute the amount of accounts receivablereported on the companyâs budgeted balance sheet for June 30.
$480,200.
$543,900.
$512,750.
$851,950.
$922,950.
7) Landmark Corp. buys $400,000 of Schroeter Company's 7%,5-year bonds payable at par value on September 1. Interest paymentsare made semiannually. Landmark plans to hold the bonds for the5-year life. When the bonds mature, the journal entry to record theproceeds will be:
A) Debit Cash $400,000; credit Interest Receivable $400,000.
B) Debit Cash $400,000; credit Long-Term Investments-HTM$400,000.
C) Debit Cash $400,000; credit Interest Revenue $400,000.
D) Debit Cash $400,000; credit Bonds Payable $400,000.
E) Debit Long-Term Investments-HTM $400,000; credit Cash$400,000.