Download EXERCISE 12-5

EXERCISE 12-5
(a) 2001
Mar. 18
June 30
Dec.
(b) Jan.
31
1
June 15
Dec. 31
Stock Investments .....................................
Cash (200,000 X 10% X $13) ...........
260,000
Cash ............................................................
Dividend Revenue .............................
($75,000 X 10%)
7,500
Market Adjustment—Available-for-Sale
Unrealized Gain—Equity .................
($320,000  $260,000)
60,000
Stock Investments .....................................
Cash (30,000 X 40% X $9) ...............
108,000
Cash ............................................................
Stock Investments .............................
($35,000 X 40%)
14,000
260,000
7,500
60,000
108,000
14,000
Stock Investments .....................................
36,000
Revenue from Investment in Ortiz Corp.
($90,000 X 40%)
36,000
EXERCISE 12-8
(a) Market Adjustment—Trading .....................................
($128,000  $120,000)
Unrealized Gain—Income ....................................
8,000
Unrealized Loss—Equity ..............................................
Market Adjustment—Available-for-Sale ...........
6,000
(b)
8,000
6,000
Balance Sheet
Current assets
Short-term investments, at fair value .................................. $128,000
Investments
Investments in stock of less than 20% owned
companies, at fair value ..................................................... 94,000
Stockholders’ equity
Less: Unrealized loss on available-for-sale securities ...... $(6,000)
Income Statement
Other revenues and gains
Unrealized gain—income...................................................... $8,000
PROBLEM 12-1A
(a) 2001
Jan.
1
Debt Investments ....................................... 1,000,000
Cash ....................................................
1,000,000
July
1
Cash ($1,000,000 X .09 X 1/2) ..................
Interest Revenue ...............................
45,000
Interest Receivable ....................................
Interest Revenue ...............................
45,000
Cash ............................................................
Interest Receivable ............................
45,000
Cash ............................................................
Debt Investments...............................
Gain on Sale of Debt
Investments .....................................
563,000
Cash ($500,000 X .09 X 1/2) .....................
Interest Revenue ...............................
22,500
Interest Receivable ....................................
Interest Revenue ...............................
22,500
Unrealized Loss—Equity..........................
Market Adjustment—
Available-for-Sale ..........................
40,000
Dec. 31
2004
Jan.
1
1
July
1
Dec. 31
(b) 2001
Dec. 31
45,000
45,000
45,000
500,000
63,000
22,500
22,500
40,000
(c)
Balance Sheet
Current assets
Interest receivable ................................................................. $ 45,000
Investments
Long-term debt investments, at fair value .................................. $960,000
The unrealized loss of $40,000 would be reported in the stockholders’ equity
section of the balance sheet as a deduction from total paid-in capital and
retained earnings.
PROBLEM 12-3A
(a) 2001
July
Aug.
1
1
Sept. 1
Oct.
Nov.
1
1
Dec. 15
31
Cash (6,000 X $1.50) .................................
Dividend Revenue .............................
9,000
Cash (1,000 X $0.50) .................................
Dividend Revenue .............................
500
Cash [(500 X $7)  $100] ..........................
Stock Investments (500 X $6)...........
Gain on Sale of Stock Investments ..
3,400
Cash [(400 X $56)  $600] ........................
Loss on Sale of Stock Investments ...........
[$21,800  (400 X $60)]
Stock Investments (400 X $60).........
21,800
2,200
Cash (1,200 X $1) ......................................
Dividend Revenue .............................
1,200
Cash (600 X $0.50) ....................................
Dividend Revenue .............................
300
Cash (5,500 X $1.50) .................................
Dividend Revenue .............................
8,250
9,000
500
3,000
400
24,000
1,200
300
8,250
2001
Jan. 1 Balance
2001
Dec. 31 Balance
(b) Dec. 31
Stock Investments
2001
120,000 Sept. 1
Oct. 1
3,000
24,000
93,000
Unrealized Loss—Equity..........................
($93,000  $84,000)
Market Adjustment—Available-for-Sale
Security
A Co. common
B Co. common
C Co. common
Cost
$36,000*
33,000**
24,000
$93,000
9,000
9,000
Fair Value
$28,200
(600 X $47)
33,000
(5,500 X $6)
22,800
(1,200 X $19)
$84,000
*$60,000  $24,000
**$36,000  $3,000
(c) Investments
Investment in stock of less than 20%
owned companies, at fair value .........................
Stockholders’ equity
Common stock .......................................................
Retained earnings ..................................................
Total paid-in capital and retained
earnings .......................................................
Less: Unrealized loss on availablefor-sale securities ...................................
Total stockholders’ equity ............................
$ 84,000
$2,000,000
1,200,000
3,200,000
(9,000)
$3,191,000