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ACCTG311 Lecture Notes - Lecture 10: Net Income, Historical Cost

53 views6 pages
erinwasp633
25 Nov 2014
School
University of Alberta
Department
Accounting
Course
ACCTG311
Professor
Kristie Dewald

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Document Summary

Landry corp has a december 31 year end. The following transactions occurred during the 2014 fiscal year: Purchased 50, ,000, 8% belvedere ltd. bonds at 102. Interest is received semi- annually on july 1 and january 1. The bonds were sold at a premium because the market interest rate was 7. 5%. Purchased 1,000 common shares in sturgeon ltd. for per share. October 31 sold 200 of the sturgeon shares for per share. Sturgeon ltd. declared a dividend of . 00 per share, payable on january. Sturgeon ltd. shares are trading at per share. Assume the bonds are held to earn interest income and that the sturgeon shares are trading investments. Record the transactions for the year, including any adjusting entries required at year end (if any) Abc company purchased 30,000 common shares, or 20% of the shares, of xyz ltd. on january 1, 2013 for ,000.

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Related Questions

Please show the work.

Presented below are selected transactions on the books ofSimonson Corporation.

May 1, 2014 Bonds payable with a par value of $934,800, which are datedJanuary 1, 2014, are sold at 105 plus accrued interest. They arecoupon bonds, bear interest at 11% (payable annually at January 1),and mature January 1, 2024. (Use interest expense account foraccrued interest.)
Dec. 31 Adjusting entries are made to record the accrued interest onthe bonds, and the amortization of the proper amount of premium.(Use straight-line amortization.)
Jan. 1, 2015 Interest on the bonds is paid.
April 1 Bonds with par value of $365,500 are called at 102 plus accruedinterest, and redeemed. (Bond premium is to be amortized only atthe end of each year.)
Dec. 31 Adjusting entries are made to record the accrued interest onthe bonds, and the proper amount of premium amortized.


Prepare journal entries for the transactions above.

Problem 14-6

Presented below are selected transactions on the books of SplishCorporation.

May 1, 2017 Bonds payable with a par value of $856,800, which are datedJanuary 1, 2017, are sold at 105 plus accrued interest. They arecoupon bonds, bear interest at 12% (payable annually at January 1),and mature January 1, 2027. (Use interest expense account foraccrued interest.)
Dec. 31 Adjusting entries are made to record the accrued interest onthe bonds, and the amortization of the proper amount of premium.(Use straight-line amortization.)
Jan. 1, 2018 Interest on the bonds is paid.
April 1 Bonds with par value of $342,720 are called at 102 plus accruedinterest, and redeemed. (Bond premium is to be amortized only atthe end of each year.)
Dec. 31 Adjusting entries are made to record the accrued interest onthe bonds, and the proper amount of premium amortized.


Prepare journal entries for the transactions above.(Round intermediate calculations to 6 decimal places,e.g. 1.251247 and final answers to 0 decimal places, e.g. 38,548.If no entry is required, select "No Entry" for the account titlesand enter 0 for the amounts. Credit account titles areautomatically indented when amount is entered. Do not indentmanually.)

please include work so I can understand how you came up with the answer

On March 31, 2018, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’s net income for the year ended December 31, 2018, was $80 million. The fair value of the shares held by Chow was $35 million at December 31, 2018. KT did not declare or pay a dividend during 2018.


Required:
1. Prepare all appropriate journal entries related to the investment during 2018.

2. Assume that Chow sold the stock on January 20, 2019 for $30 million. Prepare the journal entry Sanborn would use to record the sale.

journal entry for #1

1.Record the purchase of KT Manufacturing’s capital stock for $50 million.

2. Record the entry for KT's net income.

3 Record the fair value adjustment.

jounal entry for #2 1. Record the sale of stock on January 20, 2019 for $30 million.

As a long-term investment at the beginning of the 2018 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 8 million shares for $56 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $40 million and distributed cash dividends of $1.25 per share. At the end of the year, the fair value of the shares is $52 million.

Required:
Prepare the appropriate journal entries from the purchase through the end of the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (i.e., 10,000,000 should be entered as 10).)

1 Record the investment in Nursery Supplies shares.

2 Record the investment revenue in Nursery Supplies shares.

3 Record the cash dividends received from Nursery Supplies shares.

4 Record fair value adjustment at year-end.

Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $210 million.

Required:
1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.

transaction list 1 Record Tanner-UNF’s investment in the bonds on July 1, 2018. 2 Record interest on December 31, 2018.

3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.

transaction list
Record interest on December 31, 2018.

4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $190 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.

transactin list 1. Record the entry for fair-value adjustment, AFS investment. 2 Record the entry for reclassification adjustment.3 Record the sale of the investment by Tanner-UNF.