Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Textbook Question
Chapter 15, Problem 15.4APR
Investment reporting
O'Brien Industries Inc. is a hook publisher. The comparative unclassified balance sheets for December 31, Year 2 and Year 1 follow. Selected missing balances are shown by letters.
| ÓBrien Industries Inc. December 31, Year 2 and Year 1 |
||
| Dec. 31, Year 2 | Dec 31, Year 1 | |
| cash | $233,000 | $220,000 |
| 136,530 | 138,000 | |
| Available for sale investments (at cost)—Note 1 | $ a | $103,770 |
| Less valuation allowance for available-for-sale investments | b. | 2,500 |
| Available for-sale investments (fair value) | $ c | $101,270 |
| Interest receivable | $ d | — |
| Investment in Jolly Roger Co. stock—Note 2 | e. | $ 77,000 |
| Office equipment (net) | 115,000 | 130,000 |
| Total assets | $ f. | $666,270 |
| Accounts payable | $ 69.400 | $ 65,000 |
| Common stock | 70.000 | 70,000 |
| Excess of issue price over par | 225,000 | 225,000 |
| g | 308,770 | |
| Unrealized gain (loss) on available for-sale investments | h. | (2,500) |
| Total liabilities and Stockholders’ equity | $ i. | $666,270 |
Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows:
| No. of Shares | Cost per Share | Total Cost | Total Fair Value | |
| Bernard Co. stock | 2,250 | $17 | $ 38,250 | $ 37,500 |
| Chadwick Co. stock | 1,260 | 52 | 65,520 | 63,770 |
| $103,770 | $101,270 |
Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding .shares of Jolly Roger Co.
The following selected investment transactions occurred during Year 2:
| May 5. | Purchased 3,080 shares of Gozar Inc. at $30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security. |
| Oct. 1. | Purchased $40,000 of Nightline co. 6%, 10-Year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. |
| 9. | Dividends of $12,500 are received on the Jolly Roger co. investment. |
| Dec. 31 | Jolly Roger co. reported a total net income of $112,000 for year 2. O'Brien industries Inc. recorded equity earnings for its share of Jolly Roger co. net income. |
| 31. | Accrued three months of interest on the Nightline bonds. |
| 31. | Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: |
| Available-for-Sale Investments |
Fair Value |
| Bernard Co. stock | $15,40 per share |
| Chadwick Co. stock | $46,00 per share |
| Gozar Inc. stock | $32,00 per share |
| Nightline Co. bonds | $98 per $ 100 of face amount |
Dec. 31. Closed the O’Brien Industries Inc. net income of $146,230. O'Brien Industries Inc. paid no dividends during the year.
Instructions
Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.
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Investment Reporting
O'Brien Industries Inc. is a book publisher.
Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows:
Cost per Share
Bernard Co. stock
Chadwick Co. stock
Year 2
May 5.
Oct. 1.
Oct. 9.
Dec. 31.
Dec. 31.
Dec. 31.
Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding shares of Jolly Roger Co.
The following selected investment transactions occurred during Year 2:
Available-for-Sale Investments
Bernard Co. stock
No. of Shares
Chadwick Co. stock
Dec.
31.
Gozar Inc. stock
1,600
Nightline Co. bonds
Required:
900
Purchased 1,900 shares of Gozar Inc. at $26 per share including brokerage commission. Gozar Inc. is classified as an available-for-
sale security.
Purchased $33,000 of Nightline Co. 5%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest
on October 1 and April 1.
Dividends of $9,000 are…
Compute acid test ratio.
Compute current ratio
Chapter 15 Solutions
Accounting
Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - How does the accounting for a dividend received...Ch. 15 - Prob. 5DQCh. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQCh. 15 - How would a debit balance in Unrealized Gain...Ch. 15 - What are the factors contributing to the trend...Ch. 15 - Prob. 10DQ
Ch. 15 - Prob. 15.1APECh. 15 - Bond investment transactions Journalize the...Ch. 15 - Prob. 15.2APECh. 15 - Stock investment transactions On September 12,...Ch. 15 - Equity method On January 2, Cohan Company acquired...Ch. 15 - Prob. 15.3BPECh. 15 - Valuing trading securities at fair value On...Ch. 15 - Valuing trading securities at fair value On...Ch. 15 - valuing available-for-sale securities at fair...Ch. 15 - Valuing available-for-sale securities at fair...Ch. 15 - Prob. 15.6APECh. 15 - Prob. 15.6BPECh. 15 - Prob. 15.1EXCh. 15 - Prob. 15.2EXCh. 15 - Prob. 15.3EXCh. 15 - Entries for investment in bonds, interest and sale...Ch. 15 - Prob. 15.5EXCh. 15 - Prob. 15.6EXCh. 15 - Prob. 15.7EXCh. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Equity method for stock investment At a total cost...Ch. 15 - Prob. 15.11EXCh. 15 - Equity method for stock investment with loss On...Ch. 15 - Equity method for stock investment Hawkeye...Ch. 15 - Missing statement items, trading investments JED...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Balance sheet presentation, trading investments...Ch. 15 - Missing statement items, available-for-sale...Ch. 15 - Fair value journal entries, availableforsale...Ch. 15 - Fair value journal entries, available for sale...Ch. 15 - Fair value journal entries, availableforsale...Ch. 15 - Balance sheet presentation of available-for-sale...Ch. 15 - Balance sheet presentation of available-for-ale...Ch. 15 - Dividend yield At the market close on May 12 of a...Ch. 15 - Dividend yield The market price for Microsoft...Ch. 15 - Prob. 15.27EXCh. 15 - Prob. 15.28EXCh. 15 - Prob. 15.29EXCh. 15 - Prob. 15.1APRCh. 15 - Stock investment transactions, trading securities...Ch. 15 - Stock investment transactions, equity method and...Ch. 15 - Investment reporting O'Brien Industries Inc. is a...Ch. 15 - Prob. 15.1BPRCh. 15 - Prob. 15.2BPRCh. 15 - Stock investment transactions, equity method and...Ch. 15 - Investment reporting Teasdale Inc. manufactures...Ch. 15 - Selected transactions completed by Equinox...Ch. 15 - Prob. 15.1CPCh. 15 - Prob. 15.2CPCh. 15 - Warren Buffett and "look-through" earnings...Ch. 15 - Benefits of fair value On July 16, 20Y1, Wyatt...Ch. 15 - International fair value accounting International...
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