Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy. Held-to-maturity security : The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities. Trading securities : These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices. Fair value : Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer. Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system. Debit and credit rules: Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts. Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts. To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

Question

Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started: Expense Date Amount Attorney fees for articles of incorporation February 10 $ 40,500 Stock issuance costs March 1-March 30 wages March 1-March 30 rent April 1-May 30 wages Note: Leave no answer blank. Enter zero if applicable. March 30 6,550 March 30 2,850 April 1 May 30 24,000 16,375 b. What amount of the start-up costs and organizational expenditures may the corporation immediately expense in year 1 (excluding the portion of the expenditures that are amortized over 180 months)? Start-up costs expensed Organizational expenditures expensed

Answer 1

Question

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.

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

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Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started: Expense Date Amount Attorney fees for articles of incorporation February 10 $ 40,500 Stock issuance costs March 1-March 30 wages March 1-March 30 rent April 1-May 30 wages Note: Leave no answer blank. Enter zero if applicable. March 30 6,550 March 30 2,850 April 1 May 30 24,000 16,375 b. What amount of the start-up costs and organizational expenditures may the corporation immediately expense in year 1 (excluding the portion of the expenditures that are amortized over 180 months)? Start-up costs expensed Organizational expenditures expensed

General accounting

After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $354,000. Ingrid allocated $59,000 of the purchase price to goodwill. Ingrid's business reports its taxable income on a calendar-year basis. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3? Year 1 Deductible Amortization Expense Year 2 Year 3

Answer 2

Question

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.

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

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Answer 3

Question

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.

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

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Answer 4

Question

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.

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

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Answer 5

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

Answer 6

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

Answer 7

Chapter 12, Problem 12.25E

1.

To determine

Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.

Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.

Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Explain: How to classify this investment on Company T’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.

Answer 8

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

Answer 9

2.

To determine

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

Answer 10

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

Answer 11

3.

To determine

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

Answer 12

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

Answer 13

4.

To determine

To journalize: The fair value changes to be recorded in the books of Company T.

Answer 14

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

Answer 15

5.

To determine

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

Answer 16

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

Answer 17

6.

To determine

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

Answer 18

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Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5Q Ch. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8Q Ch. 12 - Prob. 12.9Q Ch. 12 - Prob. 12.10Q

To journalize: The purchase $240,000,000 of 6% bonds in the books of Company T.

To journalize: The receipt of semiannual interest on December 31, 2018 in the books of Company T.

To journalize: The fair value changes to be recorded in the books of Company T.

To indicate: The amount of investment value as on December 31, 2018 in the books of Corporation T

To journalize: The adjusting entry as at December 31, 2018, if the fair value adjustment was $9,200,000, fair value of shares was $200,00,000, and the cost of shares was $240,000,000.

Chapter 12 Solutions