Exercise 17-12 (E17-12) (Journal Entries for Fair Value and Equity Methods) Presented on page 890 are two independent situations.
Situation 1
Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2007. On June 30, Martinez declared and paid a $75,000 cash dividend. On December 31, Martinez reported net income of $122,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share. The securities are classified as available-for-sale.
Situation 2
Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2007. On June 15, Seles declared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000 for the year.
Instructions
Prepare all necessary journal entries in 2007 for both situations.
Click here for the solution: Presented on page 890 are two independent situations
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Showing posts with label page. Show all posts
Wednesday, November 25, 2015
Saturday, October 17, 2015
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Integrative—Complete ratio analysis
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
Click here for the solution: Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
Click here for the solution: Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Sunday, July 19, 2015
The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253
E6–2 The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253.
a. Use the information to plot a yield curve for this date.
b. If the expectations hypothesis is true, approximately what rate of return do investors expect a 5-year Treasury note to pay 5 years from now?
c. If the expectations hypothesis is true, approximately (ignoring compounding) what rate of return do investors expect a 1-year Treasury security to pay starting 2 years from now?
d. Is it possible that even though the yield curve slopes up in this problem, investors do not expect rising interest rates? Explain.
Click here for the solution: The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253
a. Use the information to plot a yield curve for this date.
b. If the expectations hypothesis is true, approximately what rate of return do investors expect a 5-year Treasury note to pay 5 years from now?
c. If the expectations hypothesis is true, approximately (ignoring compounding) what rate of return do investors expect a 1-year Treasury security to pay starting 2 years from now?
d. Is it possible that even though the yield curve slopes up in this problem, investors do not expect rising interest rates? Explain.
Click here for the solution: The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253
Wednesday, July 15, 2015
The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page
P5-3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page.
EASTWOOD COMPANY
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2010
Debits Credits
Cash $ 41,000
Accounts Receivable 163,500
Allowance for Doubtful Accounts $ 8,700
Prepaid Insurance 5,900
Inventory 208,500
Long-term Investments 339,000
Land 85,000
Construction Work in Progress 124,000
Patents 36,000
Equipment 400,000
Accumulated Depreciation of Equipment 240,000
Unamortized Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Expenses 49,200
Notes Payable 94,000
Bonds Payable 200,000
Common Stock 500,000
Paid-in Capital in Excess of Par—Common Stock 45,000
Retained Earnings 138,000
$1,422,900$1,422,900
Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2011.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2011.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2021.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.
Instructions
Prepare a balance sheet as of December 31, 2010, so that all important information is fully disclosed.
Click here for the solution: The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page
EASTWOOD COMPANY
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2010
Debits Credits
Cash $ 41,000
Accounts Receivable 163,500
Allowance for Doubtful Accounts $ 8,700
Prepaid Insurance 5,900
Inventory 208,500
Long-term Investments 339,000
Land 85,000
Construction Work in Progress 124,000
Patents 36,000
Equipment 400,000
Accumulated Depreciation of Equipment 240,000
Unamortized Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Expenses 49,200
Notes Payable 94,000
Bonds Payable 200,000
Common Stock 500,000
Paid-in Capital in Excess of Par—Common Stock 45,000
Retained Earnings 138,000
$1,422,900$1,422,900
Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2011.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2011.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2021.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.
Instructions
Prepare a balance sheet as of December 31, 2010, so that all important information is fully disclosed.
Click here for the solution: The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page
Tuesday, June 23, 2015
(Adjusting Entries) The accounts listed on the next page appeared in the December 31 trial balance of the Jane Alexander Theater
Exercise P3-5 (P3-5) (Adjusting Entries) The accounts listed on the next
page appeared in the December 31 trial balance of the Jane Alexander
Theater.
Debit Credit
Equipment $192,000
Accumulated Depreciation—Equipment $ 60,000
Notes Payable 90,000
Admissions Revenue 380,000
Advertising Expense 13,680
Salaries Expense 57,600
Interest Expense 1,400
Instructions
(a) From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
(1) The equipment has an estimated life of 16 years and a salvage value of $40,000 at the end of that time. (Use straight-line method.)
(2) The note payable is a 90-day note given to the bank October 20 and bearing interest at 10%. (Use 360 days for denominator.)
(3) In December 2,000 coupon admission books were sold at $25 each. They could be used for admission any time after January 1.
(4) Advertising expense paid in advance and included in Advertising Expense $1,100.
(5) Salaries accrued but unpaid $4,700.
(b) What amounts should be shown for each of the following on the income statement for the year?
(1) Interest expense. (3) Advertising expense.
(2) Admissions revenue. (4) Salaries expense.
Click here for the solution: (Adjusting Entries) The accounts listed on the next page appeared in the December 31 trial balance of the Jane Alexander Theater
Debit Credit
Equipment $192,000
Accumulated Depreciation—Equipment $ 60,000
Notes Payable 90,000
Admissions Revenue 380,000
Advertising Expense 13,680
Salaries Expense 57,600
Interest Expense 1,400
Instructions
(a) From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
(1) The equipment has an estimated life of 16 years and a salvage value of $40,000 at the end of that time. (Use straight-line method.)
(2) The note payable is a 90-day note given to the bank October 20 and bearing interest at 10%. (Use 360 days for denominator.)
(3) In December 2,000 coupon admission books were sold at $25 each. They could be used for admission any time after January 1.
(4) Advertising expense paid in advance and included in Advertising Expense $1,100.
(5) Salaries accrued but unpaid $4,700.
(b) What amounts should be shown for each of the following on the income statement for the year?
(1) Interest expense. (3) Advertising expense.
(2) Admissions revenue. (4) Salaries expense.
Click here for the solution: (Adjusting Entries) The accounts listed on the next page appeared in the December 31 trial balance of the Jane Alexander Theater
Saturday, June 20, 2015
(Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side Kicks Company and other related information for the year 2007 are presented on the next page
Problem 5-3 (P5-3) (Balance Sheet Adjustment and Preparation) The
adjusted trial balance of Side Kicks Company and other related
information for the year 2007 are presented on the next page.
AND SO ON
Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2008.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2008.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2018.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding. Instructions
Prepare a balance sheet as of December 31, 2007, so that all important information is fully disclosed.
Click here for the solution: (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side Kicks Company and other related information for the year 2007 are presented on the next page
AND SO ON
Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2008.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2008.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2018.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding. Instructions
Prepare a balance sheet as of December 31, 2007, so that all important information is fully disclosed.
Click here for the solution: (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side Kicks Company and other related information for the year 2007 are presented on the next page
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