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Accounting 23rd Edition Carl S. Warren - Solutions
=+Barns Co. stock $10 per share Dynasty Co. stock $35 per share High-Star Inc. stock $30 per share Opus Co. bonds 97 per $1,000 of face value
=+31. Accrued 4 months of interest on the Opus bonds.31. Adjusted the available-for-sale investment portfolio to fair value using the following fair value per share amounts:Available-for-Sale Investments Fair Value
=+Sept. 9 . Dividends of $5,700 are received on the Nahum Co. investment.Sept. 1. Purchased $18,000 of Opus Co. 5%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on September 1 and March 1.Dec. 31. Nahum Co. reported a total net income of $60,000 for
=+Note 2. The investment in Nahum Co. stock is an equity method investment representing 32% of the outstanding shares of Nahum Co.The following selected investment transactions occurred during 2011:2011 May 5 . Purchased 500 shares of High-Star, Inc., at $29 per share plus a $100 brokerage
=+fair value on December 31, 2010, are as follows:No. of Cost per Total Total Fair Shares Share Cost Value Barns Co. Stock 1,600 $12 $19,200 $18,000 Dynasty Co. Stock 900 38 34,200 33,000 _______ _______ _______ _______ $53,400 $51,000 _______ _______
=+Excess of issue price over par 160,000 160,000 Retained earnings g. 206,000 Less unrealized gain (loss) on available-for-sale investments h. 2,400 ________ ________ Total liabilities and stockholders’ equity $ i. $465,000 ________ ________ ________ ________ Note 1. Investments are classified as
=+investmentsb. 2,400 ________ ________ Available-for-sale investments (fair value) $c. $ 51,000 ________ ________ Interest receivable $d. —Investment in Nahum Co. stock—Note 2e. $ 64,000 Office equipment (net) 90,000 95,000 ________ ________ Total assets $f. $465,000 ________ ________ ________
=+Cash $178,000 $157,000 Accounts receivable (net) 106,000 98,000 Available-for-sale investments (at cost)—Note 1a. 53,400 Less valuation allowance for available-for-sale
=+PR 15-3B Debt investment transactions, available-for-sale valuation objs. 2, 4✔ 2. Available-forsale investments (at fair value), $156,000 702 Chapter 15 Investments and Fair Value Accounting Scholar House, Inc., is a book publisher. The comparative unclassified balance sheets for December 31,
=+Apr. 1. Received semiannual interest on the Mason City bonds.(Assume that there are no more purchases or sales of bonds during 2011. Also assume all subsequent interest transactions for 2011 have been recorded properly.)Dec. 31. The available-for-sale bond portfolio was adjusted to fair values
=+Feb. 1. Received semiannual interest on the Noble Co. bonds.
=+31. The available-for-sale bond portfolio was adjusted to fair values of 98 and 99 for Mason City and Noble Co. bonds, respectively.2011
=+31. Accrued $1,050 interest on Mason City bonds.
=+Oct. 1. Received semiannual interest on Mason City bonds.Dec. 31. Accrued $1,250 interest on Noble Co. bonds.
=+Aug. 1. Received semiannual interest on the Noble Co. bonds.Sept. 1. Sold $30,000 of Noble Co. bonds at 99 plus accrued interest of $150.
=+Mar. 1. Purchased $80,000 of Noble Co. 6%, 10-year bonds at face value plus accrued interest of $400. The bond is classified as an available-for-sale investment. The bonds pay interest semiannually on February 1 and August 1.Apr. 16. Purchased $105,000 of Mason City 4%, 15-year bonds at face
=+PR 15-2B Stock investment transactions, trading securities objs. 3, 4 Eclipse Inc. is an athletic footware company that began operations on January 1, 2010.The following transactions relate to debt investments acquired by Eclipse Inc., which has a fiscal year ending on December 31:2010
=+3. How are unrealized gains or losses on trading investments disclosed on the financial statements of Jupiter Insurance Co.?
=+2. Prepare the investment-related current asset balance sheet disclosures for Jupiter Insurance Co. on December 31, 2011.
=+Dec. 31. The portfolio of trading securities was adjusted to fair value using the following fair values per share for the trading securities:Echelon Inc. $22 Loral Inc. 23 Monarch Inc. 49
=+May 11. Purchased 1,600 shares of Echelon Inc. as a trading security at $18 per share plus a $160 brokerage commission.June 11. Received an annual dividend of $0.20 per share on Loral Inc. stock.Aug. 14. Sold 400 shares of Echelon Inc. for $20 per share less a $80 brokerage commission.
=+June 8. Received an annual dividend of $0.18 per share on Loral Inc. stock.Dec. 31. The portfolio of trading securities was adjusted to fair values of $24 and$48 per share for Loral Inc. and Monarch Inc., respectively.2011
=+Feb. 21. Purchased 3,000 shares of Loral Inc. as a trading security at $25 per share plus a brokerage commission of $600.Mar. 2. Purchased 900 shares of Monarch Inc. as a trading security at $52 per share plus a brokerage commission of $180.May 3. Sold 800 shares of Loral Inc. for $23.50 per
=+PR 15-1B Stock investment transactions, equity method and available-for-sale securities objs. 3, 4 Chapter 15 Investments and Fair Value Accounting 701 Jupiter Insurance Co. is a regional insurance company that began operations on January 1, 2010. The following transactions relate to trading
=+2. Prepare the investment-related asset and stockholders’ equity balance sheet disclosures for Broadway Arts Inc. on December 31, 2011, assuming the Retained Earnings balance on December 31, 2011, is $390,000.
=+to a fair value of $15 per share. Use the Valuation Allowance for Available-for-Sale Investments account in making the adjustment.Instructions
=+reported net income of $126,000 in 2011. Broadway Arts Inc. uses the equity method of accounting for its investment in Bulls Eye Inc.31. Crystal Inc. is classified as an available-for-sale investment and is adjusted
=+Jan. 5. Purchased an influential interest in Bulls Eye Inc. for $410,000 by purchasing 50,000 shares directly from the estate of the founder of Bulls Eye Inc.There are 200,000 shares of Bulls Eye Inc. stock outstanding.Mar. 8. Received the regular cash divided of $0.45 per share on Crystal Inc.
=+Dec. 31. Crystal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $19 per share. Use the Valuation Allowance for Available-for-Sale Investments account in making the adjustment.2011
=+$0.40 per share on the Crystal Inc. stock.Oct. 14. Sold 1,000 shares of Crystal Inc. stock at $15 per share, less a brokerage commission of $100.
=+Broadway Arts Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 2010. The following transactions relate to securities acquired by Broadway Arts Inc., which has a fiscal year ending on December 31:2010 Jan. 10. Purchased 5,000 shares of Crystal
=+Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.Problems Series B
=+Vita-Mighty Co. bonds 102 per $1,000 of face value 31. Closed the Miranda, Inc., net income of $18,685 for 2011. Miranda paid no dividends during 2011.Instructions
=+Tyndale Inc. stock $28 per share UR-Smart, Inc., stock $20 per share Vegas Resorts, Inc., stock $24 per share
=+31. Accrued interest on Vita-Mighty bonds purchased on October 1.31. Adjusted the available-for-sale investment portfolio to fair value using the following fair value per share amounts:Available-for-Sale Investments Fair Value
=+Dec. 31. Denver Co. reported a total net income of $40,000 for 2011. Miranda recorded equity earnings for its share of Denver Co. net income.
=+Oct. 1. Purchased $8,000 of Vita-Mighty Co. 7%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on Oct. 1 and Apr. 1.
=+2. Prepare the investment-related current asset and stockholders’ equity balance sheet disclosures for Dollar-Mart Inc. on December 31, 2011, assuming the Retained Earnings balance on December 31, 2011, is $310,000.700 Chapter 15 Investments and Fair Value Accounting
=+Dec. 31. The available-for-sale bond portfolio was adjusted to fair values of 99 and 100 for Elkin City and Morgan Co. bonds, respectively.Instructions
=+Mar. 1. Received semiannual interest on the Elkin City bonds.June 1. Received semiannual interest on the Morgan Co. bonds.(Assume that there are no more purchases or sales of bonds during 2011.Also assume all subsequent interest transactions for 2011 have been recorded properly.)
=+PR 15-4A Investment reporting objs. 2, 3, 4✔ 1.b. 6,115 2011
=+June12. Dividends of $1 per share are received on the UR-Smart Inc. stock investment.Sept. 9. Dividends of $8,900 are received on the Denver Co. investment.
=+Apr. 21. Purchased 300 shares of Vegas Resorts, Inc., at $20 per share plus a $45 brokerage commission.
=+yndale Inc. Stock 600 $24 $14,400 $16,000 UR-Smart Inc. Stock 1,200 18 21,600 24,000 _______ _______$36,000 $40,000 _______ _______ _______ _______ Note 2. The Investment in Denver Co. stock is an equity method investment representing 36% of the outstanding shares of Denver Co.The following
=+Plus unrealized gain (loss) on available-forsale investments h. 4,000 ________ ________ Total liabilities and stockholders’ equity $ i. $318,500 ________ ________ ________ ________ Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31,
=+Excess of issue price over par 160,000 160,000 Retained earnings g. 53,100
=+2011 2010 Cash $104,000 $ 98,000 Accounts receivable (net) 71,000 67,500 Available-for-sale investments (at cost)—Note 1a. 36,000 Plus valuation allowance for available-for-sale investmentsb. 4,000 ________ ________ Available-for-sale investments (fair value) $c. $ 40,000 ________ ________
=+PR 15-3A Debt investment transactions, available-for-sale valuation objs. 2, 4✔ 2. Available-forsale investment (at fair value), $147,640 Chapter 15 Investments and Fair Value Accounting 699 Miranda, Inc., manufactures and sells commercial and residential security equipment.The comparative
=+31. The available-for-sale bond portfolio was adjusted to fair values of 102 and 101 for Elkin City and Morgan Co. bonds, respectively.
=+31. Accrued $480 interest on Elkin City bonds.31. Accrued $560 interest on Morgan Co. bonds.
=+Sept. 1. Received semiannual interest on the Elkin City bonds.Oct. 1. Sold $24,000 of Elkin City bonds at 103 plus accrued interest of $80.Dec. 1. Received semiannual interest on Morgan Co. bonds.
=+June 16. Purchased $112,000 of Morgan Co. 6%, 12-year bonds at face value plus accrued interest of $280. The bond is classified as an available-for-sale investment. The bonds pay interest semiannually on June 1 and December 1.
=+May 1. Purchased $60,000 of Elkin City 4%, 10-year bonds at face value plus accrued interest of $400. The bond is classified as an available-for-sale investment. The bonds pay interest semiannually on March 1 and September 1.
=+Dollar-Mart Inc., which has a fiscal year ending on December 31:2010
=+2 . Prepare the investment-related asset and stockholders’ equity balance sheet disclosures for Roman Products, Inc., on December 31, 2011, assuming the Retained Earnings balance on December 31, 2011, is $455,000.Dollar-Mart Inc. is a general merchandise retail company that began operations on
=+1. Journalize the entries to record the preceding transactions.
=+PR 15-2A Stock investment transactions, trading securities objs. 3, 4 Instructions
=+3. How are unrealized gains or losses on trading investments disclosed on the financial statements of Western Capital Inc.?
=+2. Prepare the investment-related current asset balance sheet disclosures for Western Capital Inc. on December 31, 2011.
=+1. Journalize the entries to record these transactions.
=+Titan Inc. 37 The portfolio of trading securities was adjusted to fair value.Instructions
=+Dec. 31. The portfolio of trading securities was adjusted to fair value using the following fair values per share for the trading securities:Aspire Inc. $31 Quick Tyme Inc. 16
=+June 15. Received an annual dividend of $0.15 per share on Titan Inc. stock.Aug. 20. Sold 200 shares of Aspire Inc. for $35 per share less a $60 brokerage commission.
=+per share for Quick Tyme Inc. and Titan Inc., respectively.2011 Apr. 9. Purchased 1,100 shares of Aspire Inc. as a trading security at $41 per share plus a $165 brokerage commission.
=+June 12. Received an annual dividend of $0.12 per share on Titan Inc. stock.Dec. 31. The portfolio of trading securities was adjusted to fair values of $15 and $39
=+Mar. 12. Purchased 1,200 shares of Quick Tyme Inc. as a trading security at $14 per share plus a brokerage commission of $240.May 15. Sold 600 shares of Titan Inc. for $36 per share less a $80 brokerage commission.
=+Feb. 3. Purchased 2 ,500 shares of Titan Inc. as a trading security at $35 per share plus a brokerage commission of $500.
=+PR 15-1A Stock investment transactions, equity method and available-for-sale securities objs. 3, 4 698 Chapter 15 Investments and Fair Value Accounting Western Capital Inc. is a regional investment company that began operations on January 1, 2010. The following transactions relate to trading
=+31. Whalen Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $26 per share. Use the Valuation Allowance for Availablefor-Sale Investments account in making the adjustment.
=+31. Received $18,000 of cash dividends on Tasmania Co. stock. Tasmania Co.reported net income of $74,000 in 2011. Roman Products uses the equity method of accounting for its investment in Tasmania Co.
=+Jan. 5. Purchased an influential interest in Tasmania Co. for $620,000 by purchasing 60,000 shares directly from the estate of the founder of Tasmania. There are 150,000 shares of Tasmania Co. stock outstanding.July 8. Received the regular cash divided of $0.70 per share on Whalen Inc.
=+31. Whalen Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $21 per share. Use the Valuation Allowance for Availablefor-Sale Investments account in making the adjustment.2011
=+Dec. 9. Received the regular cash dividend of $0.60 per share.
=+EX 15-31 Dividend yield Problems Series A Roman Products, Inc., is a wholesaler of men’s hair products. The company began operations on January 1, 2010. The following transactions relate to securities acquired by Roman Products, Inc., which has a fiscal year ending on December 31:2010 Jan. 3.
=+Given eBay’s dividend policy, why would an investor be attracted to its stock?
=+EX 15-30 Dividend yield✔a. Dec. 29, 2006, 1.24%eBay Inc. developed a Web-based marketplace at http://www.ebay.com, in which individuals can buy and sell a variety of items. eBay also acquired PayPal, an online payments system that allows businesses and individuals to send and receive online
=+EX 15-29 Dividend yield The market price for Microsoft Corporation closed at $29.86 and $35.60 on December 29, 2006, and December 31, 2007, respectively. The dividends per share were $0.37 for 2006 and $0.41 for 2007.a. Determine the dividend yield for Microsoft on December 29, 2006, and December
=+Determine Bank of America’s dividend yield. (Round to one decimal place.)
=+EX 15-28 Comprehensive income Chapter 15 Investments and Fair Value Accounting 697 At the market close on January 29, 2008, Bank of America Corporation had a closing stock price of $41.84. In addition, Bank of America had a dividend per share of $2.40.
=+EX 15-27 Comprehensive income On December 31, 2009, Phoenix Co. had the following available-for-sale investment disclosure within the Current Assets section of the balance sheet:Available-for-sale investments (at cost) $105,000 Plus valuation allowance for available-for-sale investments 15,000
=+EX 15-26 Bond interest and discount amortization entries On April 23, 2010, Albert Co. purchased 1,500 shares of Conover, Inc., for $55 per share including the brokerage commission. The Conover investment was classified as an available-for-sale security. On December 31, 2010, the fair value of
=+Appendix 1 EX 15-25 Bond interest and premium amortization entries On June 1, 2010, Firefly, Inc., purchased $120,000 of 10-year, 6% Barron Company bonds at 98, including the brokerage commission. The interest is payable semiannually on June 1 and December 1.a. Journalize the entry to record the
=+EX 15-24 Bond discount amortization On May 1, 2010, Starmaker Machinery, Inc., purchased $60,000 of 10-year, 5% government bonds at 103, including the brokerage commission. The interest is received semiannually on May 1 and November 1.a. Journalize the entry to record the May 1, 2010, bond
=+b. Journalize the entry to amortize the bond discount on December 31, 2010.
=+EX 15-23 Bond premium amortization On September 1, 2010, Longstreet Company purchased $150,000 of 20-year, 6%, Marvin Company bonds at 97, including the brokerage commission. September 1 is an interest payment date.
=+EX 15-22 Balance sheet presentation of availablefor-sale investments obj. 4 696 Chapter 15 Investments and Fair Value Accounting On January 2, 2010, Patel Company purchased $80,000, 10-year, 7%, government bonds at 104, including the brokerage commission. January 2 is an interest payment
=+EX 15-21 Balance sheet presentation of available-for-sale investments obj. 4 During 2010, Toney Corporation held a portfolio of available-for-sale securities having a cost of $190,000. There were no purchases or sales of investments during the year. The market values at the beginning and end of
=+b. Prepare the Stockholders’ Equity section of the balance sheet to reflect the earnings and unrealized gain (loss) for the available-for-sale investments.
=+a. Prepare the Current Assets section of the balance sheet presentation for the availablefor-sale investments.
=+Assume that as of December 31, 2010, the Olson Products, Inc., stock had a market value of $49 per share and the Reynolds Co. stock had a market value of $20 per share. Myron Company had net income of $225,000, and paid no dividends for the year ending December 31, 2010.
=+During 2010, its first year of operations, Myron Company purchased two available-forsale investments as follows:Security Shares Purchased Cost Olson Products, Inc. 700 $29,000 Reynolds Co. 1,900 41,000
=+c. The adjustment of the available-for-sale security portfolio to fair value on December 31, 2010.
=+b. The May 10, 2010, purchase of Nova Inc. stock.
=+a. The adjustment of the available-for-sale security portfolio to fair value on December 31, 2009.
=+EX 15-20 Fair value journal entries, available-forsale investments obj. 4 Provide the journal entries to record the following:
=+a. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on:1. December 31, 2009 2. December 31, 2010
=+The market price per share for the available-for-sale security portfolio on December 31, 2009, and December 31, 2010 was as follows:Market Price per Share Dec. 31, 2009 Dec. 31, 2010 Barns Electronics, Inc. $31.00 $28.00 Ryan Co. 77.00 67.00 Sharon Co. 29.00 26.00
=+EX 15-19 Fair value journal entries, available-forsale investments objs. 3, 4 Chapter 15 Investments and Fair Value Accounting 695 Nantahla, Inc., purchased the following available-for-sale securities during 2009, its first year of operations:Name Number of Shares Cost Barns Electronics, Inc.
=+On May 10, 2010, Lipscomb purchased 700 shares of Nova Inc. at $50 per share plus a $150 brokerage fee. On December 31, 2010, the available-for-sale security portfolio had the following cost and fair value:Name Number of Shares Total Cost Total Fair Value Loomis, Inc. 600 $ 9,000 $ 12,300 Nova,
=+EX 15-18 Fair value journal entries, available-forsale investments obj. 4✔b. Dec. 31, 2010, Unrealized gain (loss)on available-for-sale investments, ($70,000)Lipscomb Inc. purchased a portfolio of available-for-sale securities in 2009, its first year of operations. The cost and fair value of
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