Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
CHAPTER 16
SOLUTIONS TO PROBLEMS: SET B
PROBLEM 16-1B
(a) 2016
Jan. 1 Debt Investments ................................. 400,000
Cash .............................................. 400,000
2019
Jan. 1 Cash ..................................................... 36,000
Interest Receivable ...................... 36,000
(b) 2016
Dec. 31 Unrealized Gain or Loss—Equity ....... 15,000
PROBLEM 16-1B (Continued)
(c) Balance Sheet
Current assets
Interest receivable ...................................................... $ 36,000
PROBLEM 16-2B
(a) Feb. 1 Stock Investments ..................................... 30,800
Cash .................................................... 30,800
Mar. 1 Stock Investments ..................................... 20,300
Cash .................................................... 20,300
Aug. 1 Cash (300 X $69) ........................................ 20,700
Stock Investments
[($30,800 ÷ 500) X 300] ................... 18,480
Gain on Sale of Stock Investments... 2,220
1 Cash ........................................................... 44,000
Debt Investments ............................... 40,000
Stock Investments
Debt Investments
Feb. 1 30,800
Aug. 1 18,480
Apr. 1 40,000
Oct. 1 40,000
PROBLEM 16-2B (Continued)
(b) Dec. 31 Unrealized Loss—Income ....................... 2,020
Fair Value Adjustment—Trading ..... 2,020
Security
Cost
Fair Value
Day common
$12,320
$13,200
(200 X $66)
(c) Current assets
Trading securities, at fair value ........................................ $30,600
(d)
Income Statement Account
Category
Dividend Revenue
Other revenues and gains
PROBLEM 16-3B
(a) 2017
July 1 Cash (5,000 X $1) ...................................... 5,000
Dividend Revenue ............................. 5,000
Aug. 1 Cash (4,000 X $.50) ................................... 2,000
Dividend Revenue ............................. 2,000
Nov. 1 Cash (3,000 X $1) ...................................... 3,000
Dividend Revenue ............................. 3,000
Stock Investments
2017
Jan. 1 Balance 190,000
2017
Sept. 1 9,000
Oct. 1 15,000
PROBLEM 16-3B (Continued)
(b) Dec. 31 Unrealized Gain or Loss—Equity
Security
Cost
Fair Value
Woolridge Co. common
$ 85,000
$ 78,200
(3,400 X $23)
(c) Investments
Investments in stock of less than
20% owned companies, at fair
value ................................................. $ 159,700
Stockholders’ equity
Common stock .................................... $2,000,000
PROBLEM 16-4B
(a) 2017
Jan. 1 Stock Investments ............................ 1,100,000
Cash ........................................... 1,100,000
June 30 Cash .................................................. 20,000
Dividend Revenue
(40,000 X $.50) ....................... 20,000
(b) 2017
Jan. 1 Stock Investments ............................ 1,100,000
Cash ........................................... 1,100,000
June 30 Cash .................................................. 20,000
Stock Investments .................... 20,000
PROBLEM 16-4B (Continued)
(c)
Cost Method
Equity
Method
Stock Investments
Unrealized gain—equity
$1,200,000*
100,000
$1,180,000**
0
PROBLEM 16-5B
(a) Jan. 7 Cash (700 X $55) ......................................... 38,500
Stock Investments .............................. 35,000
10 Stock Investments ...................................... 23,400
Cash ..................................................... 23,400
26 Cash ............................................................ 1,035
Dividend Revenue ($1.15 X 900) ........ 1,035
Feb. 2 Cash ............................................................ 320
Dividend Revenue ($.40 X 800) .......... 320
July 1 Cash ............................................................ 900
Dividend Revenue
($1 X 900) ......................................... 900
(b)
Stock Investments
1/1 Bal. 99,400
1/7 35,000
PROBLEM 16-5B (Continued)
(c) Dec. 31 Unrealized Gain or Loss—Equity ................... 3,000
Fair Value Adjustment—Available-
for-Sale ($125,400 – $122,400) ............. 3,000
Security
Cost
Fair Value
(d) Investments
Investments in stock of less than 20% owned
companies, at fair value ............................................. $122,400
Stockholders’ equity
PROBLEM 16-6B
MUSSATTO CORPORATION
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ..................................................................... $ 210,000
Short-term investments, at fair value ................ 280,000
Investments
Investment in stock of 20%–50%
owned company, at equity ............................... 900,000
Property, plant, and equipment
Land ..................................................... 780,000
Intangibles
Goodwill ............................................................... 300,000
PROBLEM 16-6B (Continued)
MUSSATTO CORPORATION
Balance Sheet (Continued)
December 31, 2017
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable ..................................................................... $ 110,000
Long-term liabilities
Bonds payable, 10%, due 2027 ...................... $ 600,000
Stockholders’ equity
Paid-in capital
Common stock, $5 par value,
500,000 shares authorized,
440,000 shares issued and
