This Website Has Been Moved to a New Link


Loading

ACC557 Week 8

Price: $14.99


ACC557 Week 8 E13-3 E13-4 E13-8 P13-2A P13-4A

E13-3 EmmyLou Company purchased 70 Harris Company 12%, 10-year, $1,000 bonds on
January 1, 2008, for $73,000. EmmyLou Company also had to pay $500 of broker’s fees. The bonds pay interest semiannually. On January 1, 2009, after receipt of interest, EmmyLou Company sold 40 of the bonds for $40,100.

Instructions
Prepare the journal entries to record the transactions described above.

E13-4 Dossett Company had the following transactions pertaining to stock investments.
Feb. 1 Purchased 600 shares of Goetz common stock (2%) for $6,000 cash, plus brokerage
fees of $200.
July 1 Received cash dividends of $1 per share on Goetz common stock.
Sept. 1 Sold 300 shares of Goetz common stock for $4,400, less brokerage fees of $100.
Dec. 1 Received cash dividends of $1 per share on Goetz common stock.

Instructions
(a) Journalize the transactions.
(b) Explain how dividend revenue and the gain (loss) on sale should be reported in the income statement

E13-8 Presented below are two independent situations.
1. Heath Cosmetics acquired 15% of the 200,000 shares of common stock of Van Fashion at a total cost of $13 per share on March 18, 2008. On June 30,Van declared and paid a $60,000 dividend.
On December 31,Van reported net income of $122,000 for the year. At December 31,
the market price of Van Fashion was $15 per share.The stock is classified as available-for-sale.
2. Yoder, Inc., obtained significant influence over Parks Corporation by buying 30% of Parks 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2008. On June 15, Parks declared and paid a cash dividend of $30,000. On December 31, Parks reported a net income of $80,000 for the year.

Instructions
Prepare all the necessary journal entries for 2008 for (a) Heath Cosmetics and (b) Yoder, Inc.

P13-2A In January 2008, the management of Noble Company concludes that it has sufficient
cash to permit some short-term investments in debt and stock securities. During the year, the following
transactions occurred.
Feb. 1 Purchased 600 shares of Hiens common stock for $31,800, plus brokerage fees of $600.
Mar. 1 Purchased 800 shares of Pryce common stock for $20,000, plus brokerage fees of $400.
Apr. 1 Purchased 50 $1,000, 7% Roy bonds for $50,000, plus $1,000 brokerage fees. Interest is
payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.60 per share on the Hiens common stock.
Aug. 1 Sold 200 shares of Hiens common stock at $58 per share less brokerage fees of $200.
Sept. 1 Received a $1 per share cash dividend on the Pryce common stock.
Oct. 1 Received the semiannual interest on the Roy bonds.
Oct. 1 Sold the Roy bonds for $50,000 less $1,000 brokerage fees.
At December 31, the fair value of the Hiens common stock was $55 per share.The fair value of
the Pryce common stock was $24 per share.

Instructions
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments.
(Use the T-account form.)
(b) Prepare the adjusting entry at December 31, 2008, to report the investment securities at fair
value. All securities are considered to be trading securities.
(c) Show the balance sheet presentation of investment securities at December 31, 2008.
(d) Identify the income statement accounts and give the statement classification of each account.

P13-4A Glaser Services acquired 30% of the outstanding common stock of Nickels Company
on January 1, 2008, by paying $800,000 for the 45,000 shares. Nickels declared and paid $0.30 per
share cash dividends on March 15, June 15, September 15, and December 15, 2008. Nickels reported
net income of $320,000 for the year. At December 31, 2008, the market price of Nickels
common stock was $24 per share.

Instructions

(a) Prepare the journal entries for Glaser Services for 2008 assuming Glaser cannot exercise significant
influence over Nickels. (Use the cost method and assume that Nickels common stock
should be classified as a trading security.)
(b) Prepare the journal entries for Glaser Services for 2008, assuming Glaser can exercise significant
influence over Nickels. Use the equity method.
(c) In tabular form, indicate the investment and income statement account balances at
December 31, 2008, under each method of accounting.

Chapter 13: Exercises 3, 4, 8, 12; Problems 2 and 4

No comments:

Post a Comment