Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 15, Problem 21E
(a) (1)
To determine
Journalize the stock investment transactions in the books of Incorporation H.
(a) (2)
To determine
Prepare journal entry for the purchase of 1,450 shares of Incorporation R, at $45 per share and a brokerage of $100.
(b)
To determine
Describe the accounting treatment of available-for-sale securities, which makes it distinct from trading securities
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Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows:
Please see the attachment for details:
On June 12, Year 2, Hurricane purchased 1,450 shares of Rogue Wave Inc. at $45 per share plus a $100 brokerage commission.a. Provide the journal entries to record the following:1. The adjustment of the available-for-sale security portfolio to fair value on December 31, Year 1.2. The June 12, Year 2, purchase of Rogue Wave Inc. stock.b. How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities?
Gruden Bancorp Inc. purchased a portfolio of trading securities during Year 1. The cost and fair value of this portfolio on December 31, Year 1, was as follows:
Please see the attachment for details:
On May 10, Year 2, Gruden Bancorp Inc. purchased 1,200 shares of Carroll Inc. at $29 per share plus a $100 brokerage commission.Provide the journal entries to record the following:a. The adjustment of the trading security portfolio to fair value on December 31, Year 1.b. The May 10, Year 2, purchase of Carroll Inc. stock.
Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations:
Please see the attachment for details:
The market price per share for the available-for-sale security portfolio on December 31,Year 1, was as follows:
Please see the attachment for details:
a. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, Year 1.b. Describe the income statement impact from the December 31, Year 1, journal entry.
Chapter 15 Solutions
Financial Accounting
Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - Prob. 4DQCh. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - Prob. 10DQ
Ch. 15 - Prob. 1PEACh. 15 - Prob. 1PEBCh. 15 - Prob. 2PEACh. 15 - Prob. 2PEBCh. 15 - Prob. 3PEACh. 15 - Prob. 3PEBCh. 15 - On January 1, Valuation Allowance for Trading...Ch. 15 - On January 1, Valuation Allowance for Trading...Ch. 15 - On January 1, Valuation Allowance for...Ch. 15 - On January 1, Valuation Allowance for...Ch. 15 - On June 30, Setzer Corporation had a market price...Ch. 15 - Prob. 6PEBCh. 15 - Prob. 1ECh. 15 - Prob. 2ECh. 15 - Bocelli Co. purchased 120,000 of 6%, 20-year Sanz...Ch. 15 - Prob. 4ECh. 15 - Prob. 5ECh. 15 - On February 22, Stewart Corporation acquired...Ch. 15 - The following equity investment transactions were...Ch. 15 - Yerbury Corp. manufactures construction equipment....Ch. 15 - Seamus Industries Inc. buys and sells investments...Ch. 15 - Prob. 10ECh. 15 - Prob. 11ECh. 15 - On January 6, Year 1, Bulldog Co. purchased 34% of...Ch. 15 - Hawkeye Companys balance sheet reported, under the...Ch. 15 - JED Capital Inc. makes investments in trading...Ch. 15 - The investments of Charger Inc. include a single...Ch. 15 - Gruden Bancorp Inc. purchased a portfolio of...Ch. 15 - Last Unguaranteed Financial Inc. purchased the...Ch. 15 - The income statement for Delta-tec Inc. for the...Ch. 15 - Highland Industries Inc. makes investments in...Ch. 15 - The investments of Steelers Inc. include a single...Ch. 15 - Prob. 21ECh. 15 - Storm, Inc. purchased the following...Ch. 15 - During Year 1, its first year of operations,...Ch. 15 - During Year 2, Copernicus Corporation held a...Ch. 15 - Prob. 25ECh. 15 - The market price for Microsoft Corporation closed...Ch. 15 - Prob. 27ECh. 15 - Prob. 28ECh. 15 - Prob. 29ECh. 15 - Soto Industries Inc. is an athletic footware...Ch. 15 - Rios Financial Co. is a regional insurance company...Ch. 15 - Forte Inc. produces and sells theater set designs...Ch. 15 - Prob. 4PACh. 15 - Rekya Mart Inc. is a general merchandise retail...Ch. 15 - Prob. 2PBCh. 15 - Glacier Products Inc. is a wholesaler of rock...Ch. 15 - Teasdale Inc. manufactures and sells commercial...Ch. 15 - Selected transactions completed by Equinox...Ch. 15 - Prob. 1CPCh. 15 - Prob. 2CPCh. 15 - Berkshire Hathaway, the investment holding company...Ch. 15 - On July 16, 20Y1, Wyatt Corp. purchased 40 acres...Ch. 15 - International Financial Reporting Standard No. 16...
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- Victoria Company has investments in marketable securities classified as trading and available-for-sale. At the beginning of the year, the aggregate market value of each portfolio exceeded its amortized cost. During the year, Victoria sold some securities from each portfolio. At the end of the year, the aggregate amortized cost of each portfolio exceeded its market value. Victoria also has investments in bonds classified as held-to-maturity, all of which were purchased for face value. During the year, some of these bonds held by Victoria were called prior to their maturity by the bond issuer. Three months before the end of the year, additional similar bonds were purchased for face value plus 2 months accrued interest. Required: 1. Explain how Victoria accounts for: a. sale of securities from each portfolio b. each equity securities portfolio at year-end 2. Explain how Victoria accounts for the disposition prior to their maturity of the long-term bonds called by their issuer. 3. Explain how Victoria reports the purchase of the additional similar bonds at the date of the acquisition.arrow_forwardCan you help with the following?  Storm, Inc. purchased the following available-for-sale securities during Year 1, its first year of operations: Name Number of Shares Cost Dust Devil, Inc. 1,880 $80,840 Gale Co. 800 64,000 Whirlwind Co. 2,850 111,150 Total  $255,990  The market price per share for the available-for-sale security portfolio on December 31, Year 1, was as follows:  Market Price per Share, Dec. 31, Year 1 Dust Devil, Inc. $39 Gale Co. 75 Whirlwind Co. 41  Required: A. Provide the journal entry to adjust the available-for-sale security portfolio to fair value on December 31, Year 1. Refer to the Chart of Accounts for exact wording of account titles. B. Describe the income statement impact from the December 31, Year 1, journal entry.arrow_forwardLast Unguaranteed Financial Inc. purchased the following trading securities during Year 1, its first year of operations: Please see the attachment for details: The market price per share for the trading security portfolio on December 31, Year 1, was as follows: Please see the attachment for details: a. Provide the journal entry to adjust the trading security portfolio to fair value on December 31, Year 1.b. Assume that the market prices of the portfolio were the same on December 31, Year 2,as they were on December 31, Year 1. What would be the journal entry to adjust the portfolio to fair value?arrow_forward
- Hurricane Inc. purchased a portfolio of available-for-sale securities in Year 1, its first year of operations. The cost and fair value of this portfolio on December 31, Year 1, was as follows: Name Number of Shares Total Cost Total Fair Value Tornado Inc. 1,250  $16,750  $18,590  Tsunami Corp. 750  24,600  26,810  Typhoon Corp. 200  5,800  5,510   Total   $47,150  $50,910  On June 12, Year 2, Hurricane purchased 500 shares of Rogue Wave Inc. at $29 per share plus a $120 brokerage commission. a. Provide the journal entries to record the following: The adjustment of the available-for-sale security portfolio to fair value on December 31, Year 1. The June 12, Year 2, purchase of Rogue Wave Inc. stock. b. How are unrealized gains and losses treated differently for available-for-sale securities than for trading securities? Unrealized gains and losses for available-for-sale securities reported as a credit (positive) or debit (negative) balance in the…arrow_forwardGruden Bancorp Inc. purchased a portfolio of trading securities during Year 1. The cost and fair value of this portfolio on December 31, Year 1, was as follows:  1 Name Number of Shares Total Cost Total Fair Value 2 Griffin Inc. 1,450.00 $29,000.00 $31,900.00 3 Luck Company 1,300.00 35,100.00 28,600.00 4 Wilson Company 860.00 30,960.00 26,660.00 5 Total  $95,060.00 $87,160.00    On May 10, Year 2, Gruden Bancorp Inc. purchased 930 shares of Carroll Inc. at $25 per share plus a $170 brokerage commission. Required: A.  Provide the journal entry to record the adjustment of the trading security portfolio to fair value on December 31, Year 1.* B.  Provide the journal entry to record the May 10, Year 2, purchase of Carroll Inc. stock.*  *Refer to the Chart of Accounts for exact wording of account titles.arrow_forwardOn May 12, Year 1, Chewco Co. purchased 2,000 shares of Jedi Inc. for $112 per share, including the brokerage commission. The Jedi investment was classified as an available-for-sale security. On December 31, Year 1, the fair value of Jedi Inc. was $124 per share. The net income of Chewco Co. was $50,000 for Year 1.Compute the comprehensive income for Chewco Co. for the year ended December 31,Year 1.arrow_forward
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