Accounting
Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Textbook Question
Chapter 15, Problem 15.4APR

Investment reporting

O'Brien Industries Inc. is a hook publisher. The comparative unclassified balance sheets for December 31, Year 2 and Year 1 follow. Selected missing balances are shown by letters.

ÓBrien Industries Inc.

Balance Sheet

December 31, Year 2 and Year 1

  Dec. 31, Year 2 Dec 31, Year 1
cash $233,000 $220,000
Accounts receivable (net) 136,530 138,000
Available for sale investments (at cost)—Note 1 $ a $103,770
Less valuation allowance for available-for-sale investments b. 2,500
Available for-sale investments (fair value) $ c $101,270
Interest receivable $ d
Investment in Jolly Roger Co. stock—Note 2 e. $ 77,000
Office equipment (net) 115,000 130,000
Total assets $ f. $666,270
Accounts payable $ 69.400 $ 65,000
Common stock 70.000 70,000
Excess of issue price over par 225,000 225,000
Retained earnings g 308,770
Unrealized gain (loss) on available for-sale investments h. (2,500)
Total liabilities and Stockholders’ equity $ i. $666,270

Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows:

  No. of Shares Cost per Share Total Cost Total Fair Value
Bernard Co. stock 2,250 $17 $ 38,250 $ 37,500
Chadwick Co. stock 1,260 52 65,520 63,770
      $103,770 $101,270

Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding .shares of Jolly Roger Co.

The following selected investment transactions occurred during Year 2:

May 5. Purchased 3,080 shares of Gozar Inc. at $30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security.
Oct. 1. Purchased $40,000 of Nightline co. 6%, 10-Year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1.
9. Dividends of $12,500 are received on the Jolly Roger co. investment.
Dec. 31 Jolly Roger co. reported a total net income of $112,000 for year 2. O'Brien industries Inc. recorded equity earnings for its share of Jolly Roger co. net income.
31. Accrued three months of interest on the Nightline bonds.
31. Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts:

Available-for-Sale

Investments

Fair Value
Bernard Co. stock $15,40 per share
Chadwick Co. stock $46,00 per share
Gozar Inc. stock $32,00 per share
Nightline Co. bonds $98 per $ 100 of face amount

Dec. 31. Closed the O’Brien Industries Inc. net income of $146,230. O'Brien Industries Inc. paid no dividends during the year.

Instructions

Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.

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Chapter 15 Solutions

Accounting

Ch. 15 - Prob. 15.1APECh. 15 - Bond investment transactions Journalize the...Ch. 15 - Prob. 15.2APECh. 15 - Stock investment transactions On September 12,...Ch. 15 - Equity method On January 2, Cohan Company acquired...Ch. 15 - Prob. 15.3BPECh. 15 - Valuing trading securities at fair value On...Ch. 15 - Valuing trading securities at fair value On...Ch. 15 - valuing available-for-sale securities at fair...Ch. 15 - Valuing available-for-sale securities at fair...Ch. 15 - Prob. 15.6APECh. 15 - Prob. 15.6BPECh. 15 - Prob. 15.1EXCh. 15 - Prob. 15.2EXCh. 15 - Prob. 15.3EXCh. 15 - Entries for investment in bonds, interest and sale...Ch. 15 - Prob. 15.5EXCh. 15 - Prob. 15.6EXCh. 15 - Prob. 15.7EXCh. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Equity method for stock investment At a total cost...Ch. 15 - Prob. 15.11EXCh. 15 - Equity method for stock investment with loss On...Ch. 15 - Equity method for stock investment Hawkeye...Ch. 15 - Missing statement items, trading investments JED...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Balance sheet presentation, trading investments...Ch. 15 - Missing statement items, available-for-sale...Ch. 15 - Fair value journal entries, availableforsale...Ch. 15 - Fair value journal entries, available for sale...Ch. 15 - Fair value journal entries, availableforsale...Ch. 15 - Balance sheet presentation of available-for-sale...Ch. 15 - Balance sheet presentation of available-for-ale...Ch. 15 - Dividend yield At the market close on May 12 of a...Ch. 15 - Dividend yield The market price for Microsoft...Ch. 15 - Prob. 15.27EXCh. 15 - Prob. 15.28EXCh. 15 - Prob. 15.29EXCh. 15 - Prob. 15.1APRCh. 15 - Stock investment transactions, trading securities...Ch. 15 - Stock investment transactions, equity method and...Ch. 15 - Investment reporting O'Brien Industries Inc. is a...Ch. 15 - Prob. 15.1BPRCh. 15 - Prob. 15.2BPRCh. 15 - Stock investment transactions, equity method and...Ch. 15 - Investment reporting Teasdale Inc. manufactures...Ch. 15 - Selected transactions completed by Equinox...Ch. 15 - Prob. 15.1CPCh. 15 - Prob. 15.2CPCh. 15 - Warren Buffett and "look-through" earnings...Ch. 15 - Benefits of fair value On July 16, 20Y1, Wyatt...Ch. 15 - International fair value accounting International...
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