Nov. 01 Received a check for the first semiannual interest payment on the Sam’s bonds.
Nov. 15 Received a $0.65 per share cash dividend on the Ace Co. shares.
Nov. 30 Sold 2,000 shares of Ace Co. stock at $29 less a $300 brokerage fee.
Dec. 15 Received a $1.10 per share cash dividend on the ParCo shares.
Dec. 20 Received a $.075 per share cash dividend on the remaining Ace Co. shares.
Dec. 31 Prepare an adjusting entry to record the fair value adjustment on the available-
for-sale securities. At December 31, the Ace Co. stock has a fair value of $28 per share,
and the ParCo stock has a fair value of $49.50 per share.
168. Eaton Company had the following long-term available-for-sale securities in its portfolio
at December 31, Year 1. Eaton had several long-term investment transactions during the next
year. After analyzing the effects of each transaction, (1) determine the amount Eaton should
report on its December 31, Year 1 balance sheet for its long-term investments in available-for-
sale securities, (2) determine the amount Eaton should report on its December 31, Year 2
balance sheet for its long-term investments in available-for-sale securities, (3) prepare the
necessary adjusting entry to record the fair value adjustment at December 31, Year 2.
Available-for-Sale Securities (LT)
Cost Fair
Value
40,000 shares of Park common stock $ 497,500 $ 488,900
15,000 shares of Radnor common stock 410,200 412,600
18,000 shares of Acadia common stock 399,600 382,500
Jan. 22 Sold 9,000 shares of Acadia common stock for $203,000 less a brokerage fee of
$850.
Mar. 17 Purchased 30,000 shares of Glacier common stock for $995,000 plus a
brokerage fee of $2,500. The shares represent a 30% ownership in Glacier.
Jun. 10 Purchased 108,000 shares of Waterton common stock for $1,525,000 plus a
brokerage fee of $4,200. The shares represent a 54% ownership in Waterton.
Nov. 01 Purchased 12,000 shares of Canyon common stock for $223,500 plus a
brokerage fee of $450. The shares represent a 10% ownership.
Dec. 31 At December 31, Year 2, the fair values of its investments are: Park, $502,500;
Radnor, $411,800; Acadia, $203,100; Glacier, $1,113,250; Waterton, $1,576,000; Canyon,
$224,750.
169. On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock
at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.’s outstanding
stock. On August 6, Sandia Corp. declared and paid cash dividends of $1.75 per share, and on
December 31 it reported net income of $150,000. Prepare the necessary entries for Froxel to
account for these transactions and events.
170. Kramer Corporation had the following long-term investment transactions.
Jan 2 Purchased 5,000 shares of Optic, Inc. for $42 per share plus $7,000 in fees and
commission. These shares represent a 35% ownership of Optic.
Oct 15 Received Optic, Inc. cash dividend of $2 per share.
Dec 31 Optic reported a net loss of $66,000 for the year.
Prepare the journal entries Kramer Corporation should record for these transactions and
events.
171. Savan Co. purchased 14,000 shares of Briton Corporation’s 40,000 shares of common
stock on January 1. This represented 35% of Briton’s outstanding shares and gave Savan Co.
significant influence over Briton’s management and operations. On October 11, Briton
declared and paid cash dividends of $30,000. On December 31, Briton reported net income of
$125,000 for the year. Prepare the journal entries Savan Co. should record to account for the
dividends received and the earnings reported by Briton Corporation.
172. On January 1, 2011, Freder Corporation purchased 7,500 shares of SportTech as a long-
term investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding
(25,000) shares of SportTech. Prepare the journal entries for Freder to record the following
transactions and events:
December 31, 2011: SportTech reported net income of $66,000 for 2011.
February 1, 2012: Sold 1,875 of the SportTech shares for $34 per share. In addition,
$1,350 in fees and commissions were paid by Freder on this sale.
November 1, 2012: Freder received a $0.90 per share cash dividend from SportTech.
December 31, 2012: SportTech reported net loss of $46,000 for 2012.
173. Rhone Importers purchases automotive parts from Germany. Prepare journal entries for
the following transactions of Rhone.
Oct 1 Purchased inventory from Weimar Co. for 12,000 euros, terms n/30. The exchange
rate was $1.15 per euro.
Oct 30 Paid Weimar Co. for the October 1 purchase. The exchange rate was $1.13 per euro.
174. Golden Age Co. exports Native American artwork to Japan. Prepare journal entries for
the following transactions.
Nov 10 Sold artwork to Tanaka Company for 10,000,000 yen, terms n130. The exchange
rate was $0.0084 per yen.
Dec 5 Received payment from Tanaka Company for the November 10 sale. The exchange
rate was $0.009 per yen.
175. Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to
record the following transactions. Include any year-end adjustments.
Dec 21 Purchased inventory from Acquilla Co. for 500,000 Mexican pesos. The exchange
rate was $0.0914 per peso. The credit terms were n/30.
Dec 31 The exchange rate was $0.0917 per peso.
Jan 20 Paid Acquilla Co. for the December 21 purchase. The exchange rate was $0.0920
per peso.
176. Mian sells American gourmet foods to merchandisers in Singapore. Prepare the journal
entries for Mian to record the following transactions. Include any year-end adjustments.
Dec 20 Sold items to Solingen, Inc., for 60,000 Singapore dollars. The exchange rate was
$0.476 per Singapore dollar. The purchase terms were n/30.
Dec 31 The exchange rate was $0.480 per Singapore dollar.
Jan 17 Received payment from Solingen for the December 20 sale. The exchange rate was
$0.495 per Singapore dollar.
Fill in the Blank Questions
177. ___________________________ are investments in securities that management intends
to convert to cash within the longer of one year or the operating cycle, and are readily
convertible to cash.
178. __________________________ are investments in securities that are not readily
convertible to cash, or are not intended to be converted to cash in the short-term.
179. _________________________ securities reflect a creditor relationship while
____________________ securities reflect an owner relationship.
180. An investing company that owns more than ________ of another (investee) company’s
voting stock is presumed to have controlling influence over the investee.
181. Short-term investments in held-to-maturity debt securities are accounted for using the
______________________.
182. Long-term investments in held-to-maturity debt securities are accounted for using the
___________________________.
183. Investments in equity securities where the investor has a significant, but not controlling
influence, are accounted for using the _______________ method.
184. Investments in equity securities where the investor has a controlling influence are
accounted for using the ________________________________.
185. ________________________ refers to all changes in equity for a period except for those
due to investments and distributions to owners.
186. Foreign exchange rates fluctuate due to changing _______________ and ___________
conditions.
187. Return on total assets is computed by dividing ___________ by __________.
188. ____________________________ are debt and equity securities that a company intends
to actively manage and trade for a profit.
189. Investments in trading securities are always classified as ______________ and are
reported as _______________ on the balance sheet.
190. Held-to-maturity securities are ____________ securities a company intends and is able
to hold until maturity.
191. Long-term investments in available-for-sale securities are reported at their _______ on
the balance sheet.
192. An investing company that owns _________ of another (investee) company’s voting
stock (but not more than 50%) is presumed to have a significant influence over the investee.
193. If a U.S. company makes a credit sale to a foreign company, the sales price must be
translated into dollars as of the date of _____________.