183)
Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These
shares were classified as a long-term available-for-sale investment. It sold the shares on December
13 for $42,100. Prepare Lander’s journal entry to record this sale.
184)
Washington Corp. held 1,500 of Vashon Company common stock with a cost of $74,387. These
shares were classified as a Long-Term available-for-sale investment. It sold the shares on
December 13 for $55,275. Prepare the journal entry to record Washington’s sale.
185)
In the current year, Logic Co. purchased bonds of Waterford Co. with a cost of $125,000 and a
year-end fair value of $123,700. Logic also purchased 1,500 shares of Jasper Co. common stock
with a cost of $25,000 and a year-end fair value of $26,100. These are classified as long-term
available-for-sale securities. Prepare the journal entry to record the market value of the investments
as of its December 31 year-end.
186)
In the current year, Largo Co. purchased bonds of MacDermott Corp. with a cost of $125,000 and a
market value of $127,000. Largo also purchased 1,500 shares of Armistead common stock with a
cost of $25,000 and a market value of $24,700. These are classified as long-term available-for-sale
securities. Prepare the journal entry to record the market value of the investments as of December
31.
187)
Barzetti had no investments prior to the current year. It had the following transactions involving
available-for-sale and held-to-maturity securities during the year. The stock purchases are
considered short-term available-for-sale securities. Prepare Barzetti’s journal entries to record the
transactions and events associated with the investment purchases.
Apr. 18 Purchased 5,000 shares of Lacy Co. stock at $26.50 per share plus a $350
brokerage fee.
May 01 Purchased $200,000 of Butcher’s 7%, two-year bonds payable at par value.
Interest payments are paid semiannually on November 1 and May 1. It is the
company’s intent to hold the bonds until maturity.
Jun. 10 Purchased 4,000 shares of SubCo stock at $48.25 plus a $325 brokerage fee.
Nov. 01 Received a check for the first semiannual interest payment on the Butcher’s
bonds.
Nov. 15 Received a $0.65 per share cash dividend on the Lacy Co. shares.
Nov. 30 Sold 2,000 shares of Lacy Co. stock at $29 less a $300 brokerage fee.
Dec. 15 Received a $1.10 per share cash dividend on the SubCo shares.
Dec. 20 Received a $.075 per share cash dividend on the remaining Lacy Co. shares.
Dec. 31 Prepare an adjusting entry to record the fair value adjustment on the
available-for-sale securities. At December 31, the Lacy Co. stock has a fair value
of $28 per share, and the SubCo stock has a fair value of $49.50 per share.
Available-for-Sale Securities (LT)
Cost
Fair
Value
40,000 shares of Beach common stock
$ 497,500
$ 488,900
15,000 shares of Danfield common stock
410,200
412,600
18,000 shares of Cardinal common stock
399,600
382,500
Jan. 22
Sold 9,000 shares of Cardinal common stock for $203,000 less a brokerage fee
of $850.
Mar. 17
Purchased 30,000 shares of Apex common stock for $995,000 plus a brokerage
fee of $2,500. The shares represent a 30% ownership in Apex.
Jun. 10
Purchased 108,000 shares of Desert Springs common stock for $1,525,000 plus
a brokerage fee of $4,200. The shares represent a 54% ownership in Desert
Springs.
Nov. 01
Purchased 12,000 shares of Cliff common stock for $223,500 plus a brokerage
188)
Weston Company had the following long-term available-for-sale securities in its portfolio at
December 31, Year 1. Weston had several long-term investment transactions during the next year.
After analyzing the effects of each transaction, (1) determine the amount Weston should report on
its December 31, Year 1 balance sheet for its long-term investments in available-for-sale securities,
(2) determine the amount Weston 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.
103
Nov. 01 Purchased 12,000 shares of Cliff 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: Beach, $502,500;
Danfield, $411,800; Cardinal, $203,100; Apex, $1,113,250; Desert Springs,
$1,576,000; Cliff, $224,750.
189)
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.
190)
Cosmos Corporation had the following long-term investment transactions.
Jan 2 Purchased 5,000 shares of Visual, Inc. for $42 per share plus $7,000 in fees
and commission. These shares represent a 35% ownership of Visual.
Oct 15 Received Visual, Inc. cash dividend of $2 per share.
Dec 31 Visual reported a net loss of $66,000 for the year.
Prepare the journal entries Cosmos Corporation should record for these transactions and events.
191)
On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the
journal entry Kostansas Corporation should record for the investment transaction.
192)
On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the
journal entry Kostansas Corporation should record for the receipt of cash dividends of $2 per share
from Morton on July 10.
193)
On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the
journal entry Kostansas Corporation should record when Morton reports net income of $52,000 for
the year on December 31.
194)
Draft Co. purchased 14,000 shares of Hamburg Corporation’s 40,000 shares of common stock on
January 1. This represented 35% of Hamburg’s outstanding shares and gave Draft Co. significant
influence over Hamburg’s management and operations. On October 11, Hamburg declared and paid
cash dividends of $30,000. On December 31, Hamburg reported net income of $125,000 for the
year. Prepare the journal entries Draft Co. should record to account for the dividends received and
the earnings reported by Hamburg Corporation.
195)
On January 1, 2014, Rickson Corporation purchased 7,500 shares of AutoTech as a long-term
investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding (25,000)
shares of AutoTech. Prepare the journal entries for Rickson to record the following transactions and
events:
December 31, 2014: AutoTech reported net income of $66,000 for 2014.
February 1, 2015: Sold 1,875 of the AutoTech shares for $34 per share. In addition,
$1,350 in fees and commissions were paid by Rickson on this sale.
November 1, 2015: Rickson received a $0.90 per share cash dividend from AutoTech.
December 31, 2015: AutoTech reported net loss of $46,000 for 2015.
196)
Rainier Importers purchases automotive parts from Austria. Prepare journal entries for the following
transactions of Rainier.
Oct 1 Purchased inventory from Klossner Co. for 12,000 euros, terms n/30. The
exchange rate was $1.15 per euro.
Oct 30 Paid Klossner Co. for the October 1 purchase. The exchange rate was $1.13 per
euro.
197)
Silver Era Co. exports Southwestern artwork to Japan. Prepare journal entries for the following
transactions.
Nov 10 Sold artwork to Ito Company for ¥10,000,000, terms n/30. The exchange rate
was $0.009 per yen.
Dec 5 Received payment from Ito Company for the November 10 sale. The exchange
rate was $0.0087 per yen.
198)
Arkansana Inc. imports inventory from Costa Rica. Prepare the journal entries for Arkansana to
record the following transactions. Include any year-end adjustments.
Dec 21 Purchased inventory from Rojas Co. for 5,000,000 Costa Rican colon. The
exchange rate was $0.002 per colon. The credit terms were n/30.
Dec 31 The exchange rate was $0.0023 per colon.
Jan 20 Paid Rojas Co. for the December 21 purchase. The exchange rate was $0.0021 per
colon.
199)
FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore. Prepare the journal
entries for FreshFoods, to record the following transactions. Include any year-end adjustments.
Dec 20 Sold items to Tan, 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 Tan for the December 20 sale. The exchange rate was
$0.495 per Singapore dollar.
SHORT ANSWER QUESTIONS
200)
________ 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.
201)
________ are investments in securities that are not readily convertible to cash, or are not intended
to be converted to cash in the short-term.
202)
securities reflect a creditor relationship while securities reflect an owner
relationship.
203)
An investing company that owns more than ________ of another (investee) company’s voting stock
is presumed to have controlling influence over the investee.
204)
Short-term investments in held-to-maturity debt securities are accounted for using the ________.
205)
Long-term investments in held-to-maturity debt securities are accounted for using the ________.
206)
Investments in equity securities where the investor has a significant, but not controlling influence,
are accounted for using the ________ method.
207)
Investments in equity securities where the investor has a controlling influence are accounted for
using the ________.
208)
________ refers to all changes in equity for a period except for those due to investments by and
distributions to owners.
209)
Foreign exchange rates fluctuate due to changing ________ and ________ conditions.
210)
Return on total assets is computed by dividing ________ by ________.
211)
________ are debt and equity securities that a company intends to actively manage and trade for a
profit.
212)
Investments in trading securities are always classified as ________ and are reported as ________
on the balance sheet.
213)
________ are debt securities a company intends and is able to hold until the maturity date.
214)
Long-term investments in available-for-sale securities are reported at their ________ on the
balance sheet.
215)
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.
216)
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 .
217)
A company that is a controlling investor in another company is known as the ________.
218)
When one company owns more than 50% of another company’s voting stock and has control over
the investee company, the investee is called the ________.
219)
________ financial statements show the financial position, results of operations, and cash flows of
all entities under the parent company’s control, including all subsidiaries.