Question: During January 2014 Optimum Glass Company purchased the following securities

During January 2014, Optimum Glass Company purchased the following securities as its long-term available-for-sale securities investment portfolio:
D Corporation Common Stock: 14,000 shares (95,000 outstanding) at $11 per share
F Corporation Bonds: $400,000 (20-year, 7 percent) purchased at par (not to be held to maturity) Subsequent to acquisition, the following data were available:

1. What accounting method should be used for the investment in D common stock? F bonds? Why?
2. Give the journal entries for the company for each year in parallel columns (if none, explain why) for each of the following:
a. Purchase of the investments.
b. Income reported by D and F Corporations.
c. Dividends and interest received from D and F Corporations.
d. Fair value effects at year-end.
3. For each year, show how the following amounts should be reported on the financial statements:
a. Long-term investments.
b. Stockholders’ equity—net unrealized losses/gains.

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  • CreatedJuly 01, 2014
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