Question 1

Rainier Importers purchases automotive parts from Austria. Prepare journal entries for the following transactions of Rainier.
Oct 1 Purchased inventory from Klossner Co. for 12,000 euros, terms n/30. The exchange rate was $1.15 per euro.
Oct 30 Paid Klossner Co. for the October 1 purchase. The exchange rate was $1.13 per euro.

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Question 2

In the current year, Logic Co. purchased bonds of Waterford Co. with a cost of $125,000 and a year-end fair value of $123,700. Logic also purchased 1,500 shares of Jasper Co. common stock with a cost of $25,000 and a year-end fair value of $26,100. These are classified as long-term available-for-sale securities. Prepare the journal entry to record the market value of the investments as of its December 31 year-end.

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Question 3

Arkansana Inc. imports inventory from Costa Rica. Prepare the journal entries for Arkansana to record the following transactions. Include any year-end adjustments.
Dec 21 Purchased inventory from Rojas Co. for 5,000,000 Costa Rican colon. The exchange rate was $0.002 per colon. The credit terms were n/30.
Dec 31 The exchange rate was $0.0023 per colon.
Jan 20 Paid Rojas Co. for the December 21 purchase. The exchange rate was $0.0021 per colon.

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Question 4

On October 31, Augustas Co. received cash dividends of $0.15 per share from its investment in Lamb Corp.'s common stock. Augustas owned 1,200 shares of Lamb Corp.'s stock on October 31. The investment is considered available-for-sale. Prepare the investor's journal entry to record the receipt of the cash dividends.

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Question 5

Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These shares were classified as a long-term available-for-sale investment. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

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Question 6

Weston Company had the following long-term available-for-sale securities in its portfolio at December 31, Year 1. Weston had several long-term investment transactions during the next year. After analyzing the effects of each transaction, (1) determine the amount Weston should report on its December 31, Year 1 balance sheet for its long-term investments in available-for-sale securities,
(2) determine the amount Weston should report on its December 31, Year 2 balance sheet for its long-term investments in available-for-sale securities, (3) prepare the necessary adjusting entry to record the fair value adjustment at December 31, Year 2.
 
 $\begin{array}{l|l|l}
\text { Available-for-Sale Securities (LT) } & \text { Cost } & \text { Fair } \
&&\text { Value } \
\hline 40,000 \text { shares of Beach common stock } & \$ 497,500 & \$ 488,900 \
\hline 15,000 \text { shares of Danfield common stock } & 410,200 & 412,600 \
\hline 18,000 \text { shares of Cardinal common stock } & 399,600 & 382,500 \
\hline
\end{array}$

$\begin{array}{l|l}
\hline \text { Jan. 22 } & \begin{array}{l}
\text { Sold } 9,000 \text { shares of Cardinal common stock for } \$ 203,000 \text { less a brokerage fee } \
\text { of } \$ 850 .
\end{array} \
\hline \text { Mar. 17 } & \begin{array}{l}
\text { Purchased 30,000 shares of Apex common stock for } \$ 995,000 \text { plus a brokerage } \
\text { fee of } \$ 2,500 . \text { The shares represent a } 30 \% \text { ownership in Apex. }
\end{array} \
\hline \text { Jun. 10 } & \begin{array}{l}
\text { Purchased 108,000 shares of Desert Springs common stock for } \$ 1,525,000 \text { plus } \
\text { a brokerage fee of } \$ 4,200 \text {. The shares represent a } 54 \% \text { ownership in Desert } \
\text { Springs. }
\end{array} \
\hline \text { Nov. 01 } & \text { Purchased 12,000 shares of Cliff common stock for } \$ 223,500 \text { plus a brokerage }
\end{array}$
 $\begin{array}{l|l|l}
\text { Available-for-Sale Securities (LT) } & \text { Cost } & \text { Fair } \
&&\text { Value } \
\hline 40,000 \text { shares of Beach common stock } & \$ 497,500 & \$ 488,900 \
\hline 15,000 \text { shares of Danfield common stock } & 410,200 & 412,600 \
\hline 18,000 \text { shares of Cardinal common stock } & 399,600 & 382,500 \
\hline
\end{array}$

$\begin{array}{l|l}
\hline \text { Jan. 22 } & \begin{array}{l}
\text { Sold } 9,000 \text { shares of Cardinal common stock for } \$ 203,000 \text { less a brokerage fee } \
\text { of } \$ 850 .
\end{array} \
\hline \text { Mar. 17 } & \begin{array}{l}
\text { Purchased 30,000 shares of Apex common stock for } \$ 995,000 \text { plus a brokerage } \
\text { fee of } \$ 2,500 . \text { The shares represent a } 30 \% \text { ownership in Apex. }
\end{array} \
\hline \text { Jun. 10 } & \begin{array}{l}
\text { Purchased 108,000 shares of Desert Springs common stock for } \$ 1,525,000 \text { plus } \
\text { a brokerage fee of } \$ 4,200 \text {. The shares represent a } 54 \% \text { ownership in Desert } \
\text { Springs. }
\end{array} \
\hline \text { Nov. 01 } & \text { Purchased 12,000 shares of Cliff common stock for } \$ 223,500 \text { plus a brokerage }
\end{array}$

Nov. 01 Purchased 12,000 shares of Cliff common stock for $223,500 plus a brokerage fee of $450. The shares represent a 10% ownership.
Dec. 31 At December 31, Year 2, the fair values of its investments are: Beach, $502,500; Danfield, $411,800; Cardinal, $203,100; Apex, $1,113,250; Desert Springs,$1,576,000; Cliff, $224,750.

Accepted Answer

The answer of Weston Company had the following long-term available-for-sale...

Question 7

In the current year, Largo Co. purchased bonds of MacDermott Corp. with a cost of $125,000 and a market value of $127,000. Largo also purchased 1,500 shares of Armistead common stock with a cost of $25,000 and a market value of $24,700. These are classified as long-term available-for-sale securities. Prepare the journal entry to record the market value of the investments as of December 31.

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Question 8

Cosmos Corporation had the following long-term investment transactions.
Jan 2 Purchased 5,000 shares of Visual, Inc. for $42 per share plus $7,000 in fees and commission. These shares represent a 35% ownership of Visual.
Oct 15 Received Visual, Inc. cash dividend of $2 per share. Dec 31 Visual reported a net loss of $66,000 for the year.
Prepare the journal entries Cosmos Corporation should record for these transactions and events.

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Question 9

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record when Morton reports net income of $52,000 for the year on December 31.

Accepted Answer

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Question 10

FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for FreshFoods, to record the following transactions. Include any year-end adjustments.
Dec 20 Sold items to Tan, Inc., for 60,000 Singapore dollars. The exchange rate was
$0.476 per Singapore dollar. The purchase terms were n/30.
Dec 31 The exchange rate was $0.480 per Singapore dollar.
Jan 17 Received payment from Tan for the December 20 sale. The exchange rate was
$0.495 per Singapore dollar.

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Question 11

Draft Co. purchased 14,000 shares of Hamburg Corporation's 40,000 shares of common stock on January 1. This represented 35% of Hamburg's outstanding shares and gave Draft Co. significant influence over Hamburg's management and operations. On October 11, Hamburg declared and paid cash dividends of $30,000. On December 31, Hamburg reported net income of $125,000 for the year. Prepare the journal entries Draft Co. should record to account for the dividends received and the earnings reported by Hamburg Corporation.

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Question 12

On January 1, 2014, Rickson Corporation purchased 7,500 shares of AutoTech as a long-term investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding (25,000) shares of AutoTech. Prepare the journal entries for Rickson to record the following transactions and events:
December 31, 2014: AutoTech reported net income of $66,000 for 2014.
February 1, 2015: Sold 1,875 of the AutoTech shares for $34 per share. In addition,
$1,350 in fees and commissions were paid by Rickson on this sale. November 1, 2015: Rickson received a $0.90 per share cash dividend from AutoTech. December 31, 2015: AutoTech reported net loss of $46,000 for 2015.

Accepted Answer

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Question 13

Mire Corporation had the following transactions involving investments in trading securities during the year. Prior to these transactions, Mire had never had any investments in trading securities. Prepare the required general journal entries to record these transactions.
Feb. 16 Purchased 800 shares of HM Corporation stock at $28 per share plus a $400 brokerage fee.
Feb. 26 Purchased 500 shares of Sugarland Co. stock at $19 per share plus a $300 brokerage fee.
Mar. 2 Received a $0.95 per share dividend from the HM Corporation.
Mar. 28 Sold 200 shares of HM Corporation stock for $31 per share less a $150 brokerage fee.
Apr. 20 Sold 150 shares of Sugarland Co. stock at $17 per share less a $100 brokerage fee.
Apr. 30 The company is preparing quarterly financial statements; prepare an adjusting entry for the fair value adjustment on the trading securities. At April 30, the HM stock has a fair value of $30 per share, and the Sugarland stock has a fair value of
$16 per share.

Accepted Answer

The answer of Mire Corporation had the following transactions involving...

Question 14

Silver Era Co. exports Southwestern artwork to Japan. Prepare journal entries for the following transactions.
Nov 10 Sold artwork to Ito Company for ¥10,000,000, terms n/30. The exchange rate was $0.009 per yen.
Dec 5 Received payment from Ito Company for the November 10 sale. The exchange rate was $0.0087 per yen.

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Question 15

Washington Corp. held 1,500 of Vashon Company common stock with a cost of $74,387. These shares were classified as a Long-Term available-for-sale investment. It sold the shares on December 13 for $55,275. Prepare the journal entry to record Washington's sale.

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Question 16

On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.'s outstanding stock. On August 6, Sandia Corp. declared and paid cash dividends of $1.75 per share, and on December 31 it reported net income of $150,000. Prepare the necessary entries for Froxel to account for these transactions and events.

Accepted Answer

The answer of On January 2, Froxel Company purchased 10,000...

Question 17

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the receipt of cash dividends of $2 per share from Morton on July 10.

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Question 18

________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle, and are readily convertible to cash.

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Question 19

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus
$700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the investment transaction.

Accepted Answer

The answer of On January 3, Kostansas Corporation purchased 5,000...

Question 20

Barzetti had no investments prior to the current year. It had the following transactions involving available-for-sale and held-to-maturity securities during the year. The stock purchases are considered short-term available-for-sale securities. Prepare Barzetti's journal entries to record the transactions and events associated with the investment purchases.
Apr. 18 Purchased 5,000 shares of Lacy Co. stock at $26.50 per share plus a $350 brokerage fee.
May 01 Purchased $200,000 of Butcher's 7%, two-year bonds payable at par value. Interest payments are paid semiannually on November 1 and May 1. It is the company's intent to hold the bonds until maturity.
Jun. 10 Purchased 4,000 shares of SubCo stock at $48.25 plus a $325 brokerage fee.
Nov. 01 Received a check for the first semiannual interest payment on the Butcher's bonds.
Nov. 15 Received a $0.65 per share cash dividend on the Lacy Co. shares. Nov. 30 Sold 2,000 shares of Lacy Co. stock at $29 less a $300 brokerage fee. Dec. 15 Received a $1.10 per share cash dividend on the SubCo shares.
Dec. 20 Received a $.075 per share cash dividend on the remaining Lacy Co. shares.
Dec. 31 Prepare an adjusting entry to record the fair value adjustment on the
available-for-sale securities. At December 31, the Lacy Co. stock has a fair value of $28 per share, and the SubCo stock has a fair value of $49.50 per share.

Accepted Answer

The answer of Barzetti had no investments prior to the...

Quiz 15: Investments

Landers, Inc., held 1,500 of Shipman Company common stock with a cost of $36,900. These shares were classified as a long-term available-for-sale investment. It sold the shares on December 13 for $42,100. Prepare Lander's journal entry to record this sale.

Washington Corp. held 1,500 of Vashon Company common stock with a cost of $74,387. These shares were classified as a Long-Term available-for-sale investment. It sold the shares on December 13 for $55,275. Prepare the journal entry to record Washington's sale.

________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle, and are readily convertible to cash.

On January 3, Kostansas Corporation purchased 5,000 shares of Morton, Inc. for $40 per share plus $700 in broker commissions. These shares represent a 40% ownership in Morton, Inc. Prepare the journal entry Kostansas Corporation should record for the investment transaction.