FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Concept explainers
Question
(Equity Securities Entries) Aranda Corporation made the following cash purchases of securities during 2017, which is the first year in which Arantxa invested in securities.
1. On January 15, purchased 10,000 shares of Sanchez Company’s common stock at $33.50 per share plus commission $1,980.
2. On April 1, purchased 5,000 shares of Vicario Co.’s common stock at $52.00 per share plus commission $3,370.
3. On September 10, purchased 7,000 shares of WTA Co.’s
On May 20, 2017, Aranda sold 4,000 shares of Sanchez Company’s common stock at a market price of $35 per share less brokerage commissions, taxes, and fees of $3,850. The year-end fair values per share were Sanchez $30, Vicario $55, and WTA $28. In addition, the chief accountant of Aranda told you that the corporation plans to hold these securities for the long-term but may sell them in order to earn profits from appreciation in prices. The equity method of accounting is not appropriate for these stock purchases.
Instructions
(a) Prepare the journal entries to record the above three security purchases.
(b) Prepare the
(c) Compute the unrealized gains or losses and prepare the
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Classic Automobiles of Huntsville Ltd. was formed on January 1, 2016, when Classic issued common shares for $300,000. Early in January 2016, Classic made the following cash payments: $150,000 for equipment $120,000 for inventory (four cars at $30,000 each) $20,000 for 2016 rent on a store building In February 2016, Classic purchased six cars for inventory on account. Cost of this inventory was $260,000 ($43,333.33 each). Before year-end, Classic paid $208,000 of this debt. Classic uses the FIFO method to account for inventory. During 2016, Classic sold eight vintage autos for a total of $500,000. Before year-end, Classic collected 80% of this amount. The business employs three people. The combined annual payroll is $95,000, of which Classic owes $4,000 at year-end. At the end of the year, Classic paid an income tax of $10,000. Late in 2016, Classic declared and paid cash dividends of $11,000. For equipment, Classic uses the straight-line depreciation method over five years with zero…arrow_forwardCool Company has decided to take their company public on January 1, 2014. Cool company had 1,000 shares authorized. The following transactions occurred. a.) Jean grey issues 5,000 shares for $15 per share during their IPO on January 1, 2014. each share has a par value of $5. Record the journal entry for this transaction. Please label debits and credits and include classification of each account. b.) On January 1, 2015, Cool company bought back 2,000 shares from the open market at a price of $25 per share. Record the journal entry for this share repurchase. Label debits and credits and include classification of each account.arrow_forwardQ2. The following transactions involving marketable securities investments of Kappa Co., occurred during 2022; a) On Feb. 14, purchased Alfa's 90-day bonds, paying cash of $170,000 (par value $170,000), issue date Feb. 14, that pay 9% interest. b) On March 21, purchased 850 shares of Beta Co. at $21 per share, in cash. c) On May 14, collected the principal and 90-days' interest on the bonds purchased in transaction a. d) On Aug. 1, paid $70,000 cash to Gama Co.'s 12% bonds (par value $70,000), issue date July 31, 2022, and retires January 31, 2023. e) On Sept. 1, Beta Co. declared a $1.80 per share cash dividend on shares payable on Oct.31. f) On Oct. 7, sold 425 shares of Beta Co. and collected totally $10,625. g) On Oct. 31, collected Gama Co.'s 90-days' interest and Beta Co.'s dividends. Required: Prepare the journal entries and post to necessary ledger accounts.arrow_forward
- Tt3.arrow_forwardPrepare the journal entries for both 2016 and 2017. Byrd company bought computers for 60k. Terms of the sale were 2/10, n30. Byrd signed a 60000, 30 day note at 12% in order to take advantage of the discount terms. This transaction took place on dec 29 2016. Acct payable pd jan 2 2017. On dec 20 2016 byrd declared a 2.00 cash dividend. 10 thousand shares were outstanding on this date. Dividend is to b paid jan 5 2017arrow_forwardRios Co. is a regional insurance company that began operations on January 1, 2012. The following selected transactions relate to investments acquired by Rios Co., which has a fiscal year ending on December 31: Record these transactions on page 10: 20Y2 Feb. May July 1 Purchased 7,400 shares of Caldwell Inc. common stock at $38 per share plus a brokerage commission of $740. Caldwell has 100,000 shares of common stock outstanding. 1 Purchased securities of Holland Inc. as a trading investment for $93,687. 1 Sold 3,850 shares of Caldwell Inc. for $36 per share less a $105 brokerage commission. 31 Received an annual dividend of $0.25 per share on 3,550 shares of Caldwell Inc. stock. Nov. 15 Sold the remaining shares of Caldwell Inc. for $39 per share less a $85 brokerage commission. Dec. 31 The trading securities of Holland Inc. have a fair value on December 31 of $84,345. Record these transactions on page 11: 20Y3 Apr. 1 Purchased securities of Fuller Inc. as a trading investment for…arrow_forward
- Glen Tay Inc. had issued 24,000 shares of its no-par common shares on April 1, 2017 for property with an appraisal value of $320,000. The common shares of the company were being traded at $13.15 each on that day. What is the journal entry required to record the issuance of the shares? Select one: a. DR Common Shares Receivable, $320,000; CR Common Share Capital, $315,600; CR Gain On Issue Of Shares, $4,400. b. DR Common Shares Receivable, $320,000; CR Common Share Capital, $315,600; CR Contributed Surplus - Common Shares, $4,400. c. DR Property, $320,000; CR Common Share Capital, $315,600; CR Retained Earnings -Issue Of Shares, $4,400. d. DR Property, $320,000; CR Common Share Capital, $315,600; CR Gain On Issue Of Shares, $4,400. e. None of the above entries.arrow_forwardOn January 1, 2013, an investor purchases 15,000 common shares of an investee at $9 (cash) per share. The shares represent 20% ownership in the investee. The investee shares are not considered "marketable" because they do not trade on an active exchange. On January 1, 2013, the book value of the investee's assets and liabilities equals $600,000 and $150,000, respectively. On that date, the appraised fair values of the investee's identifiable net assets approximated the recorded book values. During the year ended December 31, 2013, the investee company reported net income equal to $22,500 and dividends equal to $12,000. Noncontrolling investment accounting (price equals book value)Assume the investor can exert significant influence over the investee. Determine the balance in the "Investment in Investee" account at December 31, 2013. $3,600 $137,100 $135,000 $690,750arrow_forwardCool Company has decided to take their company public on January 1, 2014. Cool company had 1,000 shares authorized. The following transactions occurred. c.) On March 30, 2015, Cool company declared a dividend of $1 per share. Record the journal entry for this transaction. Label debits and credits and include classification of each account. d.) on April 30, 2015, cool company paid the dividend to shareholders. Record the journal entry for the dividend payment. Label debits and credits and include classification of each account.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education