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71) On September 1, Investors, Inc. purchases 1,000 shares (insignificant influence) of $1 par
value common stock of Hamilton International at $15 per share. On October 15, the investment is
sold for $18 per share. Record the purchase and sale of the investment in Hamilton International.
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1. Record each of these transactions, including the December 31 adjustment to fair value.
2. Calculate the balance of the Investments account on December 31.
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73) Athletic Accessories has the following transactions related to investments in common stock.
May 1 Purchases 5,000 shares (insignificant influence) of Endurance Wear
common stock for $22 per share.
June 30 Receives a cash dividend of $1 per share.
October 18 Sells 2,000 shares of Endurance Wear common stock at $25 per share.
December 31 Adjusts the investments to fair value. The fair value of Endurance Wear
common stock is now $30 per share.
1. Record each of these transactions, including an entry on December 31 to adjust the investment
to fair value.
2. Calculate the balance of the investment account on December 31.
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74) Sandy Sensations purchases twenty $1,000, 7%, 10-year bonds issued by Pizza Pier for
$20,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%.
Interest is received semiannually on June 30 and December 31.
1. Record the investment in bonds.
2. Record receipt of the first interest payment on June 30, 2021.
75) Sanders Company purchases twenty $1,000, 7%, 10-year bonds issued by Poole Company for
$18,641 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 8%.
Interest is received semiannually on June 30 and December 31.
1. Record the investment in bonds.
2. Record receipt of the first interest payment on June 30, 2021.
3. What is the amortized cost of the investment after the first interest payment?
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76) Sanders Company purchases twenty $1,000, 7%, 10-year bonds issued by Poole Company for
$21,488 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 6%.
Interest is received semiannually on June 30 and December 31.
1. Record the investment in bonds.
2. Record receipt of the first interest payment on June 30, 2021.
3. What is the amortized cost of the investment after the first interest payment?
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77) How can an investor benefit from an equity investment that does not pay dividends?
78) Investments in equity securities for which the investor has insignificant influence over the
investee are classified for reporting purposes under the fair value method. How do we report
unrealized holding gains and losses for these securities?
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79) Under what circumstances do we use the equity method to account for an investment in stock?
Explain how we record dividends received from an investment in a company accounted for using
the equity method.
80) Discuss the meaning of consolidated financial statements. When is it appropriate to
consolidate financial statements of two companies?
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81) Investments in debt securities are classified for reporting purposes in one of three categories.
List these three categories and explain which investments are included in each category. Also,
briefly describe how the reporting differs for each category.
