acct 212 homework 2 chapter 15
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Exercise 15-1 Accounting for short-term held to-maturity securities L.O. P2
Prepare journal entries to record the following transactions involving the short-term securities investments of Maxwell Co., all of which occurred during year 2011.
On February 15, paid $128,000 cash to purchase FTR’s 90-day short-term debt securities ($128,000 principal), dated February 15, that pay 9% interest (categorized as held-to-maturity securities). (Omit the “$” sign in your response.)
On May 16, received a check from FTR in payment of the principal and 90 days’ interest on the debt securities purchased in transaction a. (Do not round your intermediate calculations. Use 360 days a year. Omit the “$” sign in your response.)
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Exercise 15-2 Accounting for short-term trading securities L.O. P1
Prepare journal entries to record the following transactions involving the short-term securities investments of Smart Co., all of which occurred during year 2011.
On March 22, purchased 820 shares of FIX Company stock at $24 per share plus a $340 brokerage fee. These shares are categorized as trading securities. (Omit the “$” sign in your response.)
On September 1, received a $3 per share cash dividend on the FIX Company stock purchased in transaction a. (Omit the “$” sign in your response.)
On October 8, sold 410 shares of FIX Co. stock for $34 per share, less a $330 brokerage fee. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
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Exercise 15-3 Accounting for short-term available-for-sale securities L.O. P3
Prepare journal entries to record the following transactions involving the short-term securities investments of Prairie Co., all of which occurred during year 2011.
On August 1, paid $64,000 cash to purchase Better Buy’s 11% debt securities ($64,000 principal), dated July 30, 2011, and maturing January 30, 2012 (categorized as available-for-sale securities). (Omit the “$” sign in your response.)
On October 30, received a check from Better Buy for 90 days’ interest on the debt securities purchased in transaction a. (Do not round your intermediate calculations. Use 360 days a year. Omit the “$” sign in your response.)
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Exercise 15-6 Accounting for trading securities L.O. P1
Forex Co. purchases various investments in trading securities at a cost of $51,000 on December 27, 2011. (This is its first and only purchase of such securities.) At December 31, 2011, these securities had a fair value of $69,000.
Prepare the December 31, 2011, year-end adjusting entry for the trading securities’ portfolio. (Omit the “$” sign in your response.)
Prepare the January 3, 2012, entry when Forex sells a portion of its trading securities (that had originally cost $25,500) for $30,000. (Omit the “$” sign in your response.)
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Exercise 15-7 Adjusting available-for-sale securities to fair value L.O. P3
On December 31, 2011, Rollo Company held the following short-term investments in its portfolio of available-for-sale securities. Rollo had no short-term investments in its prior accounting periods.
Vicks Corporation bonds payable
Pace Corporation notes payable
Lake Lugano Company common stock
Prepare the December 31, 2011, adjusting entry to report these investments at fair value. (Omit the “$” sign in your response.)
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Exercise 15-8 Transactions in short-term and long-term investments L.O. P1, P2, P3
On February 15, paid $120,000 cash to purchase American General’s 120-day short-term notes at par, which are dated February 15 and pay 9% interest (classified as held-to-maturity).
On March 22, bought 600 shares of Frain Industries common stock at $35 cash per share plus a $120 brokerage fee (classified as long-term available-for-sale securities).
On June 15, received a check from American General in payment of the principal and 120 days’ interest on the notes purchased in transaction a.
On July 30, paid $36,000 cash to purchase MP3 Electronics’ 8% notes at par, dated July 30, 2011, and maturing on January 30, 2012 (classified as trading securities).
On September 1, received a $0.54 per share cash dividend on the Frain Industries common stock purchased in transaction b.
On October 8, sold 300 shares of Frain Industries common stock for $41 cash per share, less a $100 brokerage fee.
On October 30, received a check from MP3 Electronics for three months’ interest on the notes purchased in transaction d.
Prepare journal entries to record the above transactions involving both the short-term and long-term investments of Sophia Corp., all of which occurred during calendar year 2011. Use the account Short-Term Investments for any transactions that you determine are short term. (Use 360-days a year. Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)
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Exercise 15-11 Multiyear fair value adjustments to available-for-sale securities L.O. P3
Ticker Services began operations in 2009 and maintains long-term investments in available-for-sale securities. The year-end cost and fair values for its portfolio of these investments follow.
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
Prepare journal entries to record each year-end fair value adjustment for these securities. (Omit the “$” sign in your response.)
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Exercise 15-12 Classifying investments in securities; recording fair values L.O. C1, P2, P3, P4
Information regarding Central Company’s individual investments in securities during its calendar-year 2011, along with the December 31, 2011, fair values, follows.
Investment in Beeman Company bonds: $302,250 cost, $328,546 fair value. Central intends to hold these bonds until they mature in 2016.
Investment in Baybridge common stock: 29,500 shares; $240,289 cost; $261,194 fair value. Central owns 32% of Baybridge’s voting stock and has a significant influence over Baybridge.
Investment in Carroll common stock: 12,000 shares; $123,922 cost; $133,588 fair value. This investment amounts to 3% of Carroll’s outstanding shares, and Central’s goal with this investment is to earn dividends over the next few years.
Investment in Newtech common stock: 3,500 shares; $68,913 cost; $67,741 fair value. Central’s goal with this investment is to reap an increase in fair value of the stock over the next three to five years. Newtech has 30,000 common shares outstanding.
Investment in Flock common stock: 16,300 shares; $75,563 cost; $80,248 fair value. This stock is marketable and is held as an investment of cash available for operations.
Identify whether each investment should be classified as a short-term or long-term investment. For each long-term investment, indicate in which of the long-term investment classifications it should be placed.(Select “NA” in classification of long-term investment, if the type of investment is short term.)
Prepare a journal entry dated December 31, 2011, to record the fair value adjustment of the long-term investments in available-for-sale securities. Central had no long-term investments prior to year 2011.(Omit the “$” sign in your response.)
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Exercise 15-13 Securities transactions; equity method L.O. P4
Listed below are a few events and transactions of Kash Company.
Purchased 70,000 shares of Bushtex Co. common stock for $476,000 cash plus a broker’s fee of $4,650 cash. Bushtex has 127,273 shares of common stock outstanding and its policies will be significantly influenced by Kash.
Bushtex declared and paid a cash dividend of $3.10 per share.
Bushtex announced that net income for the year is $883,275.
Bushtex declared and paid a cash dividend of $3.35 per share.
Bushtex announced that net income for the year is $990,184.
Kash sold 7,000 shares of Bushtex for $371,852 cash.
Prepare journal entries to record the above transactions and events of Kash Company. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)
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Exercise 15-15A Foreign currency transactions L.O. C3
Desi of New York sells its products to customers in the United States and the United Kingdom. On December 16, 2011, Desi sold merchandise on credit to Bronson Ltd. of London at a price of 18,000 pounds. The exchange rate on that day for £1 was $2.0543. On December 31, 2011, when Desi prepared its financial statements, the rate was £1 for $2.0481. Bronson paid its bill in full on January 15, 2012, at which time the exchange rate was £1 for $2.0502. Desi immediately exchanged the 18,000 pounds for U.S. dollars.
Prepare Desi’s journal entries on December 16, December 31, and January 15. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.)
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Exercise 15-16A Computing foreign exchange gains and losses on receivables L.O. C3
On May 8, 2011, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 730,000 pesos on February 10, 2012. Jett prepares quarterly financial statements on March 31, June 30, September 30, and December 31. The exchange rates for pesos during the time the receivable is outstanding follow.
May 8, 2011
June 30, 2011
September 30, 2011
December 31, 2011
February 10, 2012
Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2011 and the first quarter of 2012. (Input all amounts as positive values. Omit the “$” sign in your response.)
Compute the amount receivable balance of Lopez reported on Jett’s balance sheets at the end of each of its last three quarters of 2011. (Omit the “$” sign in your response.)
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