Question 1

What was the after-tax realized gain or loss on the sale of available-for-sale securities in 2013? Assume a 40% tax rate.

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Question 2

In 2012, Kirby made two adjustments to its available for sale investments.
Required:
Briefly explain the adjustments and why they occurred.

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Question 3

The following transactions occurred during the year for XYZ Corporation:
(a.) During the year, trading securities were purchased for $250,000.
(b.) During the year, securities available for sale were purchased for $80,000.
(c.) During the year, trading securities that are carried on the balance sheet at their fair value of $125,000 were sold for $125,000 cash.
(d.) At the end of the year, the trading securities portfolio has an aggregate market value of $142,000 and an aggregate cost of $150,000.
(e.) At the end of the year the securities available for sale portfolio has an aggregate market value of $95,000.
Required:
Indicate how each of these transactions would affect the statement of cash flows for a corporation. Assume the statement of cash flows is prepared using the indirect method. Each transaction is assumed to be independent of the other transactions.

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Question 4

Bentz Corporation bought and sold several securities during 2013. Listed below is a summary of the transactions:  Required:
Prepare the journal entries for the above transactions. Show calculations.

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Question 5

Jackson Company engaged in the following investment transactions during the current year.  Required:
Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments. Show calculations.

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The answer of Jackson Company engaged in the following investment...

Question 6

During 2013, Largent Enterprises purchased stock as follows:
May 17, Purchased 1,000 shares of Nugent common stock for $80 per share.
July 12, Purchased 400 shares of Alfredo common stock at $60 per share, plus a $600 brokerage commission.
Largent accounts for these investments as securities available for sale. At December 31, 2013, the market values of the securities were as follows:  Required:
(1.) Prepare the journal entries to record the acquisition of the two investments.
(2.) Prepare any necessary adjusting entries assuming the stocks are both classified as available for sale securities.

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Question 7

Assuming a constant tax rate of 40%, what was the pre-tax accumulated unrealized gain or loss on available-for-sale securities at 7/1/2012?

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Question 8

On January 1, 2013, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2013, was $80,000. During 2013, Short also paid cash dividends in the amount of $24,000.
Required:
Prepare the journal entries necessary to record the above information on American Corporation's books during 2013.

Accepted Answer

The answer of On January 1, 2013, American Corporation purchased...

Question 9

On July 1, 2013, Silverwood Company purchased for cash 35% of the voting common stock of Yellowstone Corporation. Both companies have a December 31 fiscal year-end. Yellowstone Corporation, which is publicly traded on an organized stock exchange, reported its net income for the year to Silverwood and paid a dividend to Silverwood during the year.
Required:
How should Silverwood report the above information in its year-end income statement and balance sheet? Discuss the rationale for your answer.

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Question 10

On March 17, 2012, Union Corporation purchased 5,000 shares of AZQ common stock as a long-term investment at $40 per share. On December 31, 2012, and December 31, 2013, the market value of the AZQ stock is $42 and $43, respectively.
Required:
(1.) What is the appropriate reporting category for this stock? Why?
(2.) Prepare the adjusting entry on December 31, 2012.
(3.) Prepare the adjusting entry on December 31, 2013.

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Question 11

Assume Arctic Cat did not purchase any trading securities during 20X5. Write a journal entry to record any unrealized holding gains or losses on trading securities during 20X5.

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Question 12

What gain or loss would be realized if the available for sale securities on Arctic Cat's 3/31/X5 balance sheet were sold immediately for their fair value? Show the journal entry that would record the sale, and show a journal entry to record the effects of the sale on their fair value adjustment at the end of the period (ignore taxes).

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The answer of What gain or loss would be realized...

Question 13

On January 1, 2013, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2013, was $80,000. During 2013, Short also paid cash dividends in the amount of $24,000.
Required:
Compute the amount that would be reported for the investment on American Corporation's financial statements at December 31, 2013.

Accepted Answer

The answer of On January 1, 2013, American Corporation purchased...

Question 14

Krogstad Corporation bought 1,000 shares of Cole Inc. for $90 per share plus a brokerage fee of $1,800. Three months later, the shares were sold for $110 per share. The brokerage fee on the sale was $2,200.
Required:
(1.) Prepare the appropriate journal entry to record the purchase of the stock.
(2.) Prepare the appropriate journal entry to record the sale of the stock.

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The answer of Krogstad Corporation bought 1,000 shares of Cole...

Question 15

Required:
Prepare the journal entry (in thousands) that Kirby made at the end of 2013 to record the information disclosed above.

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Prepare the journal entry (in thousands) that...

Question 16

On January 2, 2013, MBH Inc. acquired 30% of the voting common stock of Construction Corporation as a long-term investment. Data from Construction Corporation's financial statements for the year ended December 31, 2013, include the following:  Required:
Prepare any necessary journal entries for MBH at December 31, 2013, under the equity method of accounting for investments.

Accepted Answer

The answer of On January 2, 2013, MBH Inc. acquired...

Question 17

Prepare journal entries that Fragrance International recorded at June 30, 2013, to (1) record any necessary changes to the fair value adjustment for available-for-sale securities and (2) record any tax effects associated with those changes.

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Question 18

Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2013. Sonny recognized a total of $400,000 net income during 2013, paid $30,000 of dividends to Fredo during 2013, and at December 31, 2013, the market value of the Sonny investment increased to $1,040,000.
Required:
Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo accounts for that investment as (1) an available-for-sale investment, and (2) elects the fair-value option.

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The answer of Fredo, Inc., purchased 10% of Sonny Enterprises...

Question 19

Eastwood Enterprises owns 30,000 shares of the Van Cleef Company (5% of the outstanding equity of Van Cleef). Eastwood is trying to determine Van Cleef's fair value. The relevant facts are as follows:
• Eastwood bought the Van Cleef shares earlier in the accounting period for $10/share at a time when the shares were publicly traded on the New York Stock Exchange.
• Since Eastwood bought the shares, Van Cleef has been delisted and there is no longer an active market in the Van Cleef shares.
• Eastwood's internal valuation specialist estimates the Van Cleef shares to be worth $8/share. Eastwood plans to continue holding the shares, but may someday sell them if their value increases sufficiently.
Required:
(1) What is the fair value of Eastwood's investment in Van Cleef? Briefly explain your choice of fair value, and relate that choice to the requirements of GAAP regarding fair value measurement.
(2) Prepare a journal entry to record any necessary fair value adjustment.

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Question 20

How much did Arctic Cat actually receive from the sale of available-for-sale securities during 20X5?

Accepted Answer

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Quiz 12: Investments

What was the after-tax realized gain or loss on the sale of available-for-sale securities in 2013? Assume a 40% tax rate.

In 2012, Kirby made two adjustments to its available for sale investments. Required: Briefly explain the adjustments and why they occurred.

Bentz Corporation bought and sold several securities during 2013. Listed below is a summary of the transactions: Required: Prepare the journal entries for the above transactions. Show calculations.

Jackson Company engaged in the following investment transactions during the current year. Required: Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments. Show calculations.

Assuming a constant tax rate of 40%, what was the pre-tax accumulated unrealized gain or loss on available-for-sale securities at 7/1/2012?

Assume Arctic Cat did not purchase any trading securities during 20X5. Write a journal entry to record any unrealized holding gains or losses on trading securities during 20X5.

Required: Prepare the journal entry (in thousands) that Kirby made at the end of 2013 to record the information disclosed above.

Prepare journal entries that Fragrance International recorded at June 30, 2013, to (1) record any necessary changes to the fair value adjustment for available-for-sale securities and (2) record any tax effects associated with those changes.

How much did Arctic Cat actually receive from the sale of available-for-sale securities during 20X5?