ADMS 3585 Study Guide - Comprehensive Income, Toyota Electronic Modulated Suspension, Net Income
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1) On February 15, Jewel Company buys 7,300 shares of MarceloCorp. common stock at $28.56 per share plus a brokerage fee of$400. The stock is classified as available-for-sale securities.This is the company’s first and only investment inavailable-for-sale securities. On March 15, Marcelo Corp. declaresa dividend of $1.18 per share payable to stockholders of record onApril 15. Jewel Company received the dividend on April 15 andultimately sells half of the Marcelo Corp. stock on November 17 ofthe current year for $29.33 per share less a brokerage fee of $250.The journal entry to record the dividend on April 15 is:
A) Debit Cash $8,614; credit Dividend Revenue $8,614.
B) Debit Cash $8,614; credit Interest Revenue $8,614.
C) Debit Cash $8,614; credit Gain on Sale of Investments$8,614.
D) Debit Cash $7,865; credit Dividend Revenue $7,865.
E) Debit Cash $7,865; credit Interest Revenue $7,865.
2) On February 15, Jewel Company buys 7,800 shares of MarceloCorp. common at $28.61 per share plus a brokerage fee of $435. Thestock is classified as available-for-sale securities. This is thecompany’s first and only investment in available-for-salesecurities. On March 15, Marcelo Corp. declares a dividend of $1.23per share payable to stockholders of record on April 15. JewelCompany received the dividend on April 15 and ultimately sells halfof the Marcelo Corp. stock on November 17 of the current year for$29.38 per share less a brokerage fee of $290. The fair value ofthe remaining 3,900 shares is $29.58 per share. The amount thatJewel Company should report in the asset section of its year-endDecember 31 balance sheet for its investment in Marcelo Corp.is:
A) $223,593.
B) $3,566.
C) $115,362.
D) $2,496.
E) $6,681.
3) Six months ago, a company purchased an investment in stockfor $69,000. The investment is classified as available-for-salesecurities. This is the company’s first and only investment inavailable-for-sale securities. The current fair value of the stockis $72,900. The company should record a:
A) Credit to Investment Revenue for $3,900.
B) Debit to Investment Revenue for $3,900.
C) Debit to Unrealized Loss-Equity for $3,900.
D) No entry is required.
E) Credit to Unrealized Gain-Equity for $3,900.
4) Claymore Corp. has the following information about itsstandards and production activity for September. The volumevariance is:
| Actual total factoryoverhead incurred | $ | 23,880 | ||
| Standard factory overhead: | ||||
| Variable overhead | $ | 5.80 | per unit produced | |
| Fixed overhead | ||||
| ($6,720 / 4,200 estimated unitsto be produced) | $ | 1.60 | per unit | |
| Actual units produced | 2,700 | units | ||
A) $2,400U.
B) $3,900U.
C) $1,500F.
D) $1,500U.
E) $2,400F.
5) Use the following information to calculate cash paid forincome taxes:
| Income TaxExpense | $ | 64,000 | |
| Income Tax Payable, January1 | 23,000 | ||
| Income Tax Payable, December31 | 14,000 |
A) $73,000.
B) $87,000.
C) $78,000.
D) $55,000.
E) $64,000.
6) On February 15, Jewel Company buys 6,100 shares of MarceloCorp. common at $28.72 per share plus a brokerage fee of $490. Thestock is classified as available-for-sale securities. This is thecompany’s first and only investment in available-for-salesecurities. On March 15, Marcelo Corp. declares a dividend of $1.24per share payable to stockholders of record on April 15. JewelCompany received the dividend on April 15 and ultimately sells halfof the Marcelo Corp. stock on November 17 of the current year for$29.49 per share less a brokerage fee of $345. The fair value ofthe remaining shares is $29.69 per share. The amount that JewelCompany should report in the equity section of its year-endDecember 31 balance sheet for its investment in Marcelo Corp. is(Round your intermediate dollar values to the nearestdollar amount):
A) Unrealized Gain –Equity; $2,714.
B) Realized Gain –Equity; $7,564.
C) Unrealized Gain – Equity; $5,427.
D) Unrealized Loss –Equity; $1,758.
E) Unrealized Gain –Equity; $9,322.
7) On February 15, Jewel Company buys 6,900 shares of MarceloCorp. common stock at $28.64 per share plus a brokerage fee of$450. The stock is classified as available-for-sale securities.This is the company’s first and only investment inavailable-for-sale securities. On March 15, Marcelo Corp. declaresa dividend of $1.16 per share payable to stockholders of record onApril 15. Jewel Company received the dividend on April 15 andultimately sells half of the Marcelo Corp. stock on November 17 ofthe current year for $29.41 per share less a brokerage fee of $305.The fair value of the remaining shares is $29.61 per share. Theimpact on Jewel’s net income as a result of its investment inMarcelo Corp. was a(n) (Round your intermediate dollarvalues to the nearest dollar amount):
A) Decrease to income of $2,127.
B) Increase to income of $10,131.
C) Increase to income of $3,122.
D) Decrease to income of $8,004.
E) Increase to income of $5,565.
You are working for The Wellington Company on temporary assignment while one of the accountants is on family leave. You have been asked to review the company’s investment
The balance sheet caption used to report long-term investments in stocks not intended as a source of cash in the normal operations of the business.
journal entries and provide necessary information to the accountant preparing the financial statements.
PAGE 8
JOURNAL
| DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
| 1 | Jan. 17 | Investment-Red Rock Co. Stock | 37,400.00 | ||
| 2 | Cash | 37,400.00 | |||
| 3 | Feb. 5 | Investment-Sunset Village Bonds | 34,000.00 | ||
| 4 | Interest Receivable | 290.00 | |||
| 5 | Cash | 34,290.00 | |||
| 6 | 23 | Investment-Mays and Co. Stock | 25,500.00 | ||
| 7 | Cash | 25,500.00 | |||
| 8 | Mar. 31 | Cash | 340.00 | ||
| 9 | Interest Receivable | 290.00 | |||
| 10 | Interest Revenue | 50.00 | |||
| 11 | Apr. 6 | Investment in Minions Corp. Stock | 170,000.00 | ||
| 12 | Cash | 170,000.00 | |||
| 13 | 30 | Cash | 750.00 | ||
| 14 | Dividend Revenue | 750.00 | |||
| 15 | Jul. 1 | Cash | 18,162.00 | ||
| 16 | Loss on Sale of Investments | 2,448.00 | |||
| 17 | Interest Revenue | 210.00 | |||
| 18 | Investment-Sunset Village Bonds | 20,400.00 | |||
| 19 | Aug. 14 | Cash | 41,300.00 | ||
| 20 | Gain on Sale of Investments | 1,800.00 | |||
| 21 | Investment-Harding Construction Stock | 39,500.00 | |||
| 22 | 27 | Cash | 3,400.00 | ||
| 23 | Investment in Minions Corp. Stock | 3,400.00 | |||
| 24 | Sep. 22 | Cash | 29,000.00 | ||
| 25 | Gain on Sale of Investments | 3,500.00 | |||
| 26 | Investment-Mays and Co. Stock | 25,500.00 | |||
| 27 | 30 | Cash | 130.00 | ||
| 28 | Interest Revenue | 130.00 | |||
| 29 | Nov. 1 | Investment in Minions Corp. Stock | 15,300.00 | ||
| 30 | Income of Minions Corp. | 15,300.00 | |||
| 31 | Dec. 31 | Unrealized Loss on Available-For-Sale Investments | 3,275.00 | ||
| 32 | Valuation Allowance for Available-For-Sale Investments | 3,275.00 | |||
| 33 | 31 | Valuation Allowance for Trading Investments | 2,150.00 | ||
| 34 | Unrealized Gain on Trading Investments | 2,150.00 |
The accountant preparing the financial statements has asked you to provide the fair value as of the end of the year for the investments. Present the information as it would be shown on the financial statements. Last year, The Wellington Company reported costs of $68,000 in trading investments and $82,000 in available-for-sale investments. Refer to the journal entries shown on The Wellington Company panel. Assume that all investments sold during this year were trading investments and that purchases during the year were new investments.
| Trading Securities | |
| Trading investments at cost | ? |
| Plus valuation allowance for trading investments | 2150 |
| Trading investments at fair value | ? |
| Available-For-Sale Securities | |
| Available-for-sale investments at cost | ? |
| Less valuation allowance for available-for-sale investments | 3275 |
| Available-for-sale investments at fair value | ? |
Available-for-Sale Securities
At the beginning of 2013, Ace Company had the followingportfolio of investments in available-for-sale securities (commonstock):
| Security | Cost | 12/31/12 Fair Value |
| A | $24,300 | $28,800 |
| B | 28,400 | 27,300 |
| Totals | $52,700 | $56,100 |
During 2013 the following transactions occurred:
| May 3 | Purchased C securities (commonstock) for $11,300. |
| July 16 | Sold all of the A securities for$28,800. |
| Dec. 31 | Received dividends of $700 on the Band C securities, for which the following information wasavailable: |
| 12/31/13 Fair Value | |
| B | $30,400 |
| C | 14,200 |
1. Prepare journal entries to record the preceding information.For compound entries, if an amount box does not require an entry,leave it blank.
| 2013 | investments in available for sale securities | $????? | |
| May 3 | cash | $????? | |
| July 16 | cash | $????? | |
| sale | investments in available for sale securities | $????? | |
| gain on sale of available for sale securities | $????? | ||
| July 16 | unrealized holding gain/loss: available for salesecurities | $????? | |
| adj | allowance for change in fair value of investment | $????? | |
| Dec 31 | cash | $????? | |
| divd | dividend income | $????? | |
| Dec 31 | allowance for change in fair value of investment | $????? | |
| adj | unrealized holding gain/loss: available for salesecurities | $????? |
2. What is the balance in the Unrealized Holding Gain/Lossaccount on December 31, 2013?
$??????
