int 2 ch 17 computational

During 2012, Woods Company purchased 40,000 shares of Holmes Corp. common stock for $630,000 as an available-for-sale investment. The fair value of these shares was $600,000 at December 31, 2012. Woods sold all of the Holmes stock for $17 per share on December 3, 2013, incurring $28,000 in brokerage commissions. Woods Company should report a realized gain on the sale of stock in 2013 of a. $22,000. b. $50,000. c. $52,000. d. $80,000.

a

Harrison Co. owns 20,000 of the 50,000 outstanding shares of Taylor, Inc. common stock. During 2013, Taylor earns $1,200,000 and pays cash dividends of $960,000 Harrison should report investment revenue for 2013 of a. $480,000. b. $384,000. c. $96,000. d. $0. +++

a

Landis Co. purchased $1,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2012, with interest payable on July 1 and January 1. The bonds sold for $1,041,580 at an effective interest rate of 7%. Using the effective-interest method, Landis Co. decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2012 and December 31, 2012 by the amortized premiums of $3,540 and $3,660, respectively. 74. At December 31, 2012, the fair value of the Ritter, Inc. bonds was $1,060,000. What should Landis Co. report as other comprehensive income and as a separate component of stockholders' equity? a. $25,620. b. $18,420. c. $7,200. d. No entry should be made

a

On August 1, 2012, Fowler Company acquired $600,000 face value 10% bonds of Kasnic Corporation at 104 plus accrued interest. The bonds were dated May 1, 2012, and mature on April 30, 2017, with interest payable each October 31 and April 30. The bonds will be held to maturity. What entry should Fowler make to record the purchase of the bonds on August 1, 2012? a. Debt Investments 624,000 Interest Revenue 15,000 Cash 639,000 b. Debt Investments 639,000 Cash 639,000 c. Debt Investments 639,000 Interest Revenue 15,000 Cash 624,000 d. Debt Investments 600,000 Premium on Bonds 39,000 Cash 639,000

a

On January 3, 2012, Moss Co. acquires $400,000 of Adam Company's 10-year, 10% bonds at a price of $425,672 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity Assuming that Moss Co. uses the straight-line method, what is the amount of premium amortization that would be recognized in 2014 related to these bonds? a. $2,568 b. $1,688 c. $1,840 d. $2,008

a

On November 1, 2012, Horton Co. purchased Lopez, Inc., 10-year, 9%, bonds with a face value of $500,000, for $450,000. An additional $15,000 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2019. Horton uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Horton's 2012 income statement as a result of Horton's available-for-sale investment in Lopez was a. $8,750. b. $8,333. c. $7,500. d. $6,666.

a

On its December 31, 2012 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment (available-for-sale) account. There was no change during 2013 in the composition of Calhoun's portfolio of equity investments held as available-for-sale securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/13 X $125,000 $160,000 Y 100,000 85,000 Z 175,000 125,000 $400,000 $370,000 The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2013 is a. $40,000. b. $30,000. c. $10,000. d. $0

a

On its December 31, 2012, balance sheet, Trump Co. reported its investment in available-for-sale securities, which had cost $600,000, at fair value of $550,000. At December 31, 2013, the fair value of the securities was $585,000. What should Trump report on its 2013 income statement as a result of the increase in fair value of the investments in 2013? a. $0. b. Unrealized loss of $15,000. c. Realized gain of $35,000. d. Unrealized gain of $35,000

a

At December 31, 2013, Atlanta Co. has a stock portfolio valued at $120,000. Its cost was $99,000. If the Securities Fair Value Adjustment (Available-for-Sale) has a debit balance of $6,000, which of the following journal entries is required at December 31, 2013? a. Fair Value Adjustment 21,000 (available-for-sale) Unrealized Holding Gain or Loss-Equity 21,000 b. Fair Value Adjustment 15,000 (available-for-sale) Unrealized Holding Gain or Loss-Equity 15,000 c. Unrealized Holding Gain or Loss-Equity 21,000 Fair Value Adjustment 21,000 (available-for-sale) d. Unrealized Holding Gain or Loss-Equity 15,000 Fair Value Adjustment 15,000 (available-for-sale)

b

Brown Corporation earns $600,000 and pays cash dividends of $200,000 during 2012. Dexter Corporation owns 3,000 of the 10,000 outstanding shares of Brown. How much investment income should Dexter report in 2012? a. $200,000. b. $180,000. c. $120,000. d. $600,000

b

During 2010, Hauke Co. purchased 3,000, $1,000, 9% bonds. The carrying value of the bonds at December 31, 2012 was $2,940,000. The bonds mature on March 1, 2017, and pay interest on March 1 and September 1. Hauke sells 1,500 bonds on September 1, 2014, for $1,482,000, after the interest has been received. Hauke uses straight-line amortization. The gain on the sale is a. $0. b. $7,200. c. $12,000. d. $16,800

b

Instrument Corp. has the following investments which were held throughout 2012-2013: Fair Value Cost 12/31/12 12/31/13 Trading $450,000 $600,000 $570,000 Available-for-sale 450,000 480,000 540,000 87. What amount of gain or loss would Instrument Corp. report in its income statement for the year ended December 31, 2013 related to its investments? a. $30,000 gain. b. $30,000 loss. c. $210,000 gain. d. $120,000 gain

b

Kern Company purchased bonds with a face amount of $600,000 between interest payment dates. Kern purchased the bonds at 102, paid brokerage costs of $9,000, and paid accrued interest for three months of $15,000. The amount to record as the cost of this long-term investment in bonds is a. $636,000. b. $621,000. c. $612,000. d. $600,000

b

On January 2, 2013 Pod Company purchased 25% of the outstanding common stock of Jobs, Inc. and subsequently used the equity method to account for the investment. During 2013 Jobs, Inc. reported net income of $630,000 and distributed dividends of $270,000. The ending balance in the Investment in Pod Company account at December 31, 2013 was $480,000 after applying the equity method during 2013. What was the purchase price Pod Company paid for its investment in Jobs, Inc? a. $255,000 b. $390,000 c. $570,000 d. $705,000

b

On October 1, 2012, Menke Co. purchased to hold to maturity, 500, $1,000, 9% bonds for $520,000. An additional $15,000 was paid for accrued interest. Interest is paid semiannually on December 1 and June 1 and the bonds mature on December 1, 2016. Menke uses straight-line amortization. Ignoring income taxes, the amount reported in Menke's 2012 income statement from this investment should be a. $11,250. b. $10,050. c. $12,450. d. $13,650

b

On October 1, 2012, Renfro Co. purchased to hold to maturity, 2,000, $1,000, 9% bonds for $1,980,000 which includes $30,000 accrued interest. The bonds, which mature on February 1, 2021, pay interest semiannually on February 1 and August 1. Renfro uses the straight-line method of amortization. The bonds should be reported in the December 31, 2012 balance sheet at a carrying value of a. $1,950,000. b. $1,951,500. c. $1,980,000. d. $1,980,500

b

On its December 31, 2012 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment (available-for-sale) account. There was no change during 2013 in the composition of Calhoun's portfolio of equity investments held as available-for-sale securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/13 X $125,000 $160,000 Y 100,000 85,000 Z 175,000 125,000 $400,000 $370,000 93. What amount of unrealized loss on these securities should be included in Calhoun's stockholders' equity section of the balance sheet at December 31, 2013? a. $40,000. b. $30,000. c. $10,000. d. $0.

b

Patton Company purchased $600,000 of 10% bonds of Scott Co. on January 1, 2013, paying $564,150. The bonds mature January 1, 2023; interest is payable each July 1 and January 1. The discount of $35,850 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2013, Patton Company should report interest revenue from the Scott Co. bonds of: a. $63,588. b. $62,113. c. $62,052. d. $60,000

b

Richman Co. purchased $600,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2012, with interest payable on July 1 and January 1. The bonds sold for $624,948 at an effective interest rate of 7%. Using the effective interest method, Richman Co. decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2012 and December 31, 2012 by the amortized premiums of $2,124 and $2,196, respectively At February 1, 2013, Richman Co. sold the Carlin bonds for $618,000. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2013 was $620,250. Assuming Richman Co. has a portfolio of available-for-sale debt investments, what should Richman Co. report as a gain (or loss) on the bonds? a. $0. b. ($2,250). c. ($13,122). d. ($17,622).

b

The following information relates to Windom Company for 2013: Realized gain on sale of available-for-sale securities $30,000 Unrealized holding gains arising during the period on available-for-sale securities 70,000 Reclassification adjustment for gains included in net income 20,000 Windom's 2013 other comprehensive income is a. $50,000. b. $80,000. c. $100,000. d. $120,000.

b

Tracy Co. owns 4,000 of the 10,000 outstanding shares of Penn Corp. common stock. During 2013, Penn earns $360,000 and pays cash dividends of $120,000. 108. If the beginning balance in the investment account was $720,000, the balance at December 31, 2013 should be a. $720,000. b. $816,000. c. $864,000. d. $960,000

b

Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $600,000 on January 2, 2013. During 2013, Darby Company declared dividends of $100,000 and reported earnings for the year of $400,000. 103. If Blanco Company used the fair value method of accounting for its investment in Darby Company, its Equity Investment (Darby) account on December 31, 2013 should be a. $580,000. b. $660,000. c. $600,000. d. $680,000

c

Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $600,000 on January 2, 2013. During 2013, Darby Company declared dividends of $100,000 and reported earnings for the year of $400,000. If Blanco Company uses the equity method of accounting for its investment in Darby Company, its Equity Investment (Darby) account at December 31, 2013 should be a. $580,000. b. $600,000. c. $660,000. d. $680,000.

c

Brown Corporation earns $600,000 and pays cash dividends of $200,000 during 2012. Dexter Corporation owns 3,000 of the 10,000 outstanding shares of Brown. 105. What amount should Dexter show in the investment account at December 31, 2012 if the beginning of the year balance in the account was $800,000? a. $980,000. b. $800,000. c. $920,000. d. $1,200,000

c

Harrison Co. owns 20,000 of the 50,000 outstanding shares of Taylor, Inc. common stock. During 2013, Taylor earns $1,200,000 and pays cash dividends of $960,000 If the beginning balance in the investment account was $750,000, the balance at December 31, 2013 should be a. $1,230,000. b. $990,000. c. $846,000. d. $750,000

c

Instrument Corp. has the following investments which were held throughout 2012-2013: Fair Value Cost 12/31/12 12/31/13 Trading $450,000 $600,000 $570,000 Available-for-sale 450,000 480,000 540,000 What amount would be reported as accumulated other comprehensive income related to investments in Instrument Corp.'s balance sheet at December 31, 2012? a. $60,000 gain. b. $90,000 gain. c. $30,000 gain. d. $180,000 gain

c

Kramer Company's trading securities portfolio which is appropriately included in current assets is as follows: December 31, 2012 Fair Unrealized Cost Value Gain (Loss) Catlett Corp. $250,000 $205,000 $(45,000) Lyman, Inc. 245,000 265,000 20,000 $495,000 $470,000 $(25,000) Ignoring income taxes, what amount should be reported as a charge against income in Kramer's 2012 income statement if 2012 is Kramer's first year of operation? a. $0. b. $20,000. c. $25,000. d. $45,000

c

Landis Co. purchased $1,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2012, with interest payable on July 1 and January 1. The bonds sold for $1,041,580 at an effective interest rate of 7%. Using the effective-interest method, Landis Co. decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2012 and December 31, 2012 by the amortized premiums of $3,540 and $3,660, respectively. At April 1, 2013, Landis Co. sold the Ritter bonds for $1,030,000. After accruing for interest, the carrying value of the Ritter bonds on April 1, 2013 was $1,033,750. Assuming Landis Co. has a portfolio of Available-for-Sale Debt Securities, what should Landis Co. report as a gain or loss on the bonds? a. ($29,370). b. ($21,870). c. ($3,750). d. $ 0.

c

Myers Co. acquired a 60% interest in Gannon Corp. on December 31, 2012 for $1,260,000. During 2013, Gannon had net income of $800,000 and paid cash dividends of $200,000. At December 31, 2013, the balance in the investment account should be a. $1,260,000. b. $1,740,000. c. $1,620,000. d. $1,860,000.

c

On August 1, 2012, Dambro Co. acquired 400, $1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1, 2012, and mature on April 30, 2018, with interest paid each October 31 and April 30. The bonds will be added to Dambro's available-for-sale portfolio. The preferred entry to record the purchase of the bonds on August 1, 2012 is a. Debt Investments 397,000 Cash 397,000 b. Debt Investments 388,000 Interest Receivable 9,000 Cash 397,000 c. Debt Investments 388,000 Interest Revenue 9,000 Cash 397,000 d. Debt Investments 400,000 Interest Revenue 9,000 Discount on Debt Investments 12,000 Cash 397,000

c

On November 1, 2012, Howell Company purchased 900 of the $1,000 face value, 9% bonds of Ramsey, Incorporated, for $948,000, which includes accrued interest of $13,500. The bonds, which mature on January 1, 2017, pay interest semiannually on March 1 and September 1. Assuming that Howell uses the straight-line method of amortization and that the bonds are appropriately classified as available-for-sale, the net carrying value of the bonds should be shown on Howell's December 31, 2012, balance sheet at a. $900,000. b. $934,500. c. $933,120. d. $948,000.

c

Ziegler Corporation purchased 25,000 shares of common stock of the Sherman Corporation for $40 per share on January 2, 2010. Sherman Corporation had 100,000 shares of common stock outstanding during 2013, paid cash dividends of $120,000 during 2013, and reported net income of $400,000 for 2013. Ziegler Corporation should report revenue from investment for 2013 in the amount of a. $30,000. b. $70,000. c. $100,000. d. $110,000

c

During 2012 Logic Company purchased 6,000 shares of Midi, Inc. for $30 per share. The investment was classified as a trading security. During the year Logic Company sold 1,500 shares of Midi, Inc. for $35 per share. At December 31, 2012 the market price of Midi, Inc.'s stock was $28 per share. What is the total amount of gain/(loss) that Logic Company will report in its income statement for the year ended December 31, 2012 related to its investment in Midi, Inc. stock? a. ($12,000) b. $7,500 c. ($4,500) d. ($1,500)

d

On January 3, 2012, Moss Co. acquires $400,000 of Adam Company's 10-year, 10% bonds at a price of $425,672 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity. 82. Assuming that Moss Co. uses the effective-interest method, what is the amount of interest revenue that would be recognized in 2013 related to these bonds? a. $40,000 b. $42,568 c. $38,312 *d. $38,160

d

Patton Company purchased $600,000 of 10% bonds of Scott Co. on January 1, 2013, paying $564,150. The bonds mature January 1, 2023; interest is payable each July 1 and January 1. The discount of $35,850 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. 72. On July 1, 2013, Patton Company should increase its Debt Investments account for the Scott Co. bonds by a. $3,588. b. $2,056. c. $1,794. d. $1,028

d

Richman Co. purchased $600,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2012, with interest payable on July 1 and January 1. The bonds sold for $624,948 at an effective interest rate of 7%. Using the effective interest method, Richman Co. decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2012 and December 31, 2012 by the amortized premiums of $2,124 and $2,196, respectively At December 31, 2012, the fair value of the Carlin, Inc. bonds was $636,000. What should Richman Co. report as other comprehensive income and as a separate component of stockholders' equity? a. $0 b. $4,320 c. $11,052 d. $15,372

d

Tracy Co. owns 4,000 of the 10,000 outstanding shares of Penn Corp. common stock. During 2013, Penn earns $360,000 and pays cash dividends of $120,000. Tracy should report investment revenue for 2013 of a. $48,000. b. $96,000. c. $120,000. d. $144,000

d