Horngren's Financial & Managerial Accounting (5th Edition)

5th Edition

ISBN: 9780133866292

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Textbook Question

Chapter 10, Problem 10.22BP

Accounting for stock investments

The beginning balance sheet of Water Source Co. included a $800,000 investment in Larsen stock (35% ownership).

During the year, Water Source completed the following investment transactions:

Mar. 3	Purchased 6,000 shares at $7 per share of Jack Software common stock as a long-term, available-for-sale investment, representing 3% ownership.
May 15	Received a cash dividend of $0.53 per share on the Jack investment.
Dec. 15	Received a cash dividend of $1 10,000 from Larsen investment.
31	Received Larsen's annual report showing $110,000 of net income.
31	Received Jack's annual report showing $600,000 of net income for the year.
31	Larsen's stock fair value at year-end was $728,500.
31	Jack's common stock fair value at year-end was $10 per share.

Requirements

1. Journalize the transactions for the year of Water Source.

2. Post transactions to T-accounts to determine the December 31, 2016, balances related to the investment and investment income accounts.

3. Prepare Water Source's partial balance sheet at December 31, 2016, from your answers in Requirement 2.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 10, Problem 10.21BP

Chapter 10, Problem 10.23CP

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Chapter 10 Solutions

Horngren's Financial & Managerial Accounting (5th Edition)

Ch. 10 - Prob. 1QC Ch. 10 - Which of the following investments is most likely...Ch. 10 - If Intervale Railway invests 100,000 in 5% bonds...Ch. 10 - Prob. 4QC Ch. 10 - Prob. 5QC Ch. 10 - Prob. 6QC Ch. 10 - Prob. 7QC Ch. 10 - Harvard Co. purchased a trading investment on...Ch. 10 - Prob. 9QC Ch. 10 - Prob. 10QC

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Solution Summary: The author explains that available-for-sale investments are investments in debt or equity securities, where the investor wishes to hold less than 20% of voting stock, and neither referred to trading or hold-to-maturity investments

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Chapter 10 Solutions