
Requirement 1
To prepare:
Requirement 1

Answer to Problem 4BPSB
Solution:
Date | Accounts Titles and Descriptions | Debit | Credit |
2015 | |||
Jan-05 | Long term Investment − Bloch’s | 200,500 | |
Cash | 200,500 | ||
(To purchase common shares of Bloch’s) | |||
Aug-01 | Cash | 21,000 | |
Long term Investment − Bloch’s | 21,000 | ||
(To record the receipt of dividends from Bloch.) | |||
Dec-31 | Long term Investment − Bloch’s | 20,500 | |
Long Investment Income | 20,500 | ||
(To record Bloch’s reported income) | |||
2016 | |||
Aug-01 | Cash | 27,000 | |
Long term Investment Income | 27,000 | ||
(To record the receipt of dividends from Bloch.) | |||
Dec-31 | Long term Investment − Bloch’s | 19,500 | |
Long term Investment Income | 19,500 | ||
(To record Bloch’s reported income) | |||
2018 | |||
Jan-08 | Cash | 375,000 | |
Long term Investment − Bloch’s | 182,500 | ||
Gain on Sale of Investment | 192,500 | ||
(To record sale of Equity Investment − Bloch’s) |
Explanation of Solution
The above journal entries can be explained as under −
For the year 2015 −
Jan. 5 − The common shares of Bloch’s have been purchased for $200,500. Thus, Long term Investment − Bloch’s for shares have been debited and cash has been credited for $200,500
Aug.01 − Bloch paid dividends of $1.05 per share. The dividends on Bloch will be calculated as under −
Since, dividends are received, they will be credited or subtracted from the Long term Investment − Bloch’s account.
Dec. 31 − the net income of Bloch is $ 82,000 for the year. The net income will be added to Bloch investment account.
The net income of Bloch will be calculated as under −
Thus, the net income is added to Long term Investment − Bloch account.
For the year 2016 −
Aug.1 − Bloch paid dividends of $ 1.35 per share. The dividends on Bloch will be calculated as under −
Since, dividends are received, they will be credited or subtracted from the Long term Investment − Bloch account.
Dec. 31 − the net income of Bloch is $ 78,000 for the year. The net income will be added to Bloch investment account.
The net income of Bloch will be calculated as under −
Thus, the net income is added to Long term Investment − Bloch account.
For the year 2017 −
Jan. 08 − the sale of investment for $ 375,000
Given,
- The shares are sold for = $ 375,000
- Carrying value of shares −
- Purchase price of shares = $ 200,500
- Net income for year 2015 = $ 20,500
- Net income for year 2016 = $ 19,50
- Dividend for 2015 = $ 21,000
- Dividend for 2016 = $ 27,000
Now, gain will be calculated as −
The cash will be debited with the sale amount of $ 375,000. The Long term Investment − Bloch will be credited with $ 192,500 and the gain on sale of investment will be credited with $ 182,500.
Thus, all the journal entries have been prepared.
To compute:
Carrying (Book) value per share of Brinkley’s Investment in Bloch common stock

Answer to Problem 4BPSB
Solution:
The carrying (Book) value per share of Brinkley’s Investment in Bloch common stock = $9.63 per share.
Explanation of Solution
The above answer can be explained as under −
Given,
- Carrying value of investment = $ 192,500 (explained in requirement 1)
- Number of shares purchased = 20,000 shares
Thus, the carrying (Book) value per share has been calculated.
To compute:
Net Increase or decrease in Brinkley’s equity from January 5, 2017 through January 8, 2017

Answer to Problem 4BPSB
Solution:
The net Increase in Brinkley’s equity from January 5, 2017 through January 8, 2017 = $ 222,500
Explanation of Solution
The above answer can be explained as under −
Given,
- Earnings from Bloch − 2015 = $ 20,500
- Earnings from Bloch − 2016 = $ 19,500
- Gain on sale of Investment = $ 182,500
Thus, the net Increase in Brinkley’s equity from January 5, 2017 through January 8, 2017 has been determined.
Part 2 − Investments as Available for Sale Investments
To prepare:
Journal entries to record the transactions and events given for Brinkley.

Answer to Problem 4BPSB
Solution:
Date | Accounts Titles and Descriptions | Debit | Credit |
2015 | |||
Jan-05 | Long term Investment - Bloch (LT) | 200,500 | |
Cash | 200,500 | ||
(To record purchase of shares of Bloch) | |||
Aug-01 | Cash | 21,000 | |
Dividend revenue | 21,000 | ||
(To record receipt of dividend revenue) | |||
Dec-31 | Market Adjustment - LT | 37,500 | |
Unrealized Gain - LT equity | 37,500 | ||
(To record unrealized loss on the LT securities) | |||
2016 | |||
Aug-01 | Cash | 27,000 | |
Dividend revenue | 27,000 | ||
(To record receipt of dividend revenue) | |||
Dec-31 | Market Adjustment - LT | 35,000 | |
Unrealized Gain - LT equity | 35,000 | ||
(To record unrealized loss on the LT securities) | |||
2017 | |||
Jan-08 | Cash | 375,000 | |
Long term Investment - Bloch (LT) | 200,500 | ||
Gain on Sale of Investment | 174,500 | ||
(To record sale of LT investment) | |||
Jan-08 | Unrealized Gain - AFS equity | 72,500 | |
Market Adjustment − AFS | 72,500 | ||
(To record unrealized gain transferred to adjustment account) |
Explanation of Solution
The above journal entries can be explained as under −
For the year 2015 −
Jan. 05 − The common shares of Bloch have been purchased for $ 200,500. Thus, Long term Investment - Bloch (AFS) has been debited and cash has been credited for $200,500.
Aug.01 −The dividend is received on Bloch’s Stock for $ 1.05 per share. The dividend is calculated as under −
Dividend received = Number of shares X Dividend per share
Dividend received = 20,000 shares X $ 1.05 per share
Dividend received = $ 21,000
Thus, the cash received will be debited and the dividend revenue will be credited.
Dec. 31 −The fair value per share of Bloch is $ 11.90. The total fair value will be calculated as −
Total fair value = Number of shares X Fair value per share
Total fair value = 20,000 shares X $ 11.90
Total fair value = $ 238,000
Cost price of shares = $ 200,500
The gain on fair value of shares will be calculated and adjusted as −
Unrealized gain = Total fair value − Cost price per share
Unrealized gain = $ 238,000 - $ 200,500
Unrealized gain = $ 37,500
The unrealized gain will be credited and Market Adjustment −LT will be debited with $ 37,500.
For the year 2016 −
Aug-01 −The dividend is received on Bloch’s Stock for $ 1.35 per share. The dividend is calculated as under −
Dividend received = Number of shares X Dividend per share
Dividend received = 20,000 shares X $ 1.35per share
Dividend received = $ 27,000
Thus, the cash received will be debited and the dividend revenue will be credited.
Dec. 31 −The fair value per share of Bloch is $ 13.65. The total fair value will be calculated as −
Total fair value = Number of shares X Fair value per share
Total fair value = 20,000 shares X $13.65
Total fair value = $ 273,000
Cost price of shares = $ 200,500
The gain on fair value of shares will be calculated and adjusted as −
Unrealized gain = Total fair value − Cost price per share
Unrealized gain = $ 273,000 - $ 200,500
Unrealized gain = $ 72,500
Amount to be adjusted = Total amount − Amount adjusted in 2015
Amount to be adjusted = $72,500-$37,500
Amount to be adjusted = $35,000
The unrealized gain will be credited and Market Adjustment − LT will be debited with $ 35,000.
For the year 2017 −
Jan. 08 − The shares are sold for $ 375,000. The cost price of the shares was $ 200,500.
Now, gain will be calculated as −
Gain on sale = Sale price of investment − Carrying value of investment
Gain on sale = $ 375,000 - $ 200,500
Gain on sale = $174,500
The cash will be debited with the sale amount of $ 375,000. The Long term Investment - Bloch (LT) will be credited with $ 200,500 and the gain on sale of investment will be credited with $ 174,500.
In the next entry, the unrealized gain is debited with $ 72,500 (i.e. $ 37,500 + $ 35,000) and the Market Adjustment − LT is credited with $ 72,500.
Thus, all the journal entries have been prepared.
To compute:
Carrying (Book) value per share of Brinkley’s Investment in Bloch common stock

Answer to Problem 4BPSB
Solution:
The carrying (Book) value per share of Brinkley’s Investment in Bloch common stock = $ 10.03 per share.
Explanation of Solution
The above answer can be explained as under −
Given,
- Carrying value of investment = $ 200,500
- Number of shares purchased = 20,000 shares
Thus, the carrying (Book) value per share has been calculated.
To compute:
Net Increase or decrease in Brinkley’s equity from January 5, 2017 through January 8, 2017

Answer to Problem 4BPSB
Solution:
The net Increase in Brinkley’s equity from January 5, 2017 through January 8, 2017 = $ 222,500
Explanation of Solution
The above answer can be explained as under −
Given,
- Earnings from Bloch − 2015 = $ 21,000
- Earnings from Bloch − 2016 = $ 27,000
- Gain on sale of Investment = $ 174,500
Thus, the net Increase in Brinkley’s equity from January 5, 2017 through January 8, 2017 has been determined.
Want to see more full solutions like this?
Chapter 15 Solutions
Fundamental Accounting Principles -Hardcover
- What are fixed assets projected to be given this information for this accounting question?arrow_forwardSolve this accounting problemarrow_forwardA machine costing $77,500 with a 5-year life and $4,700 residual value was purchased January 2. Compute depreciation for each of the 5 years, using the double-declining-balance method. Year1 Y2 Y3 Y4 Y5arrow_forward
- Solare Company acquired mineral rights for $536,800,000. The diamond deposit is estimated at 48,800,000 tons. During the current year, 3,390,000 tons were mined and sold. Required: 1.Determine the depletion rate. 2. Determine the amount of depletion expense for the current year. 3.Journalize the adjusting entry to recognize the depletion expense. Refer to the Chart of Accounts for exact wording of account titles. _____________ Debit / Credit _____________ Debit / Crditarrow_forwardExercise 1-24 (Algo) Linking the statement of owner's equity and balance sheet LO P2 Mahomes Company reported the following data at the end of its first year of operations on December 31. Cash Accounts receivable Equipment Land Accounts payable Owner investments Mahomes, Withdrawals Net income $ 15,500 16,500 18,500 62,500 12,500 62,500 31,500 69,500 (a) Prepare its year-end statement of owner's equity. Hint. Mahomes, Capital on January 1 was $0. (b) Prepare its year-end balance sheet, using owner's capital calculated in part a. Complete this question by entering your answers in the tabs below. Required A Required B Prepare its year-end statement of owner's equity. Hint: Mahomes, Capital on January 1 was $0. Cash MAHOMES COMPANY Statement of Owner's Equity For Year Ended December 31arrow_forwardht = ences X On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash withdrawals by owner Consulting revenue Salaries expense Cash $ 8,450 Accounts receivable 16,950 Office supplies 4,080 Rent expense Land 46,020 Office equipment 18,860 Telephone expense Accounts payable 9,280 Owner investments 84,920 Miscellaneous expenses $ 2,930 16,950 4,420 7,900 860 680 Exercise 1-18 (Algo) Preparing an income statement LO P2 Using the above information prepare a December income statement for the business. ERNST CONSULTING Income Statement Revenues Rent expense Salaries expense Telephone expense Total revenues $ 4,420 7,900 860 $ SA Assets Cash 8,450 Accounts receivable 16,950 Office supplies 4,080 Land 46,020 Office equipment 18,860 navable 9,280 13,180 5 11 of 14 Next >arrow_forward
- Equipment was acquired at the beginning of the year at a cost of $77,220. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,560. P1 What was the depreciation expense for the first year? _______ P2 Assuming the equipment was sold at the end of the second year for $58,320, determine the gain or loss on sale of the equipment. $_______________ P3 Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles. 1. ____ Debit / Credit 2.____ Debit / Credit 3.____ Debit / Credit 4.____ Debit / Creditarrow_forwardUse the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash Accounts receivable Office supplies Land Office equipment Accounts payable Owner investments $ 8,450 Cash withdrawals by owner 16,950 4,080 Rent expense Consulting revenue Salaries expense 18,860 Telephone expense Miscellaneous expenses 46,020 9,280 84,920 $ 2,930 16,950 4,420 7,900 860 680 Check my work Exercise 1-21 (Algo) Preparing a statement of cash flows LO P2 Also assume the following: a. The owner's initial investment consists of $38,900 cash and $46,020 in land. b. The company's $18,860 equipment purchase is paid in cash. c. Cash paid to employees is $2,700. The accounts payable balance of $9,280 consists of the $4,080 office supplies…arrow_forwardht = ences X On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash withdrawals by owner Consulting revenue Salaries expense Cash $ 8,450 Accounts receivable 16,950 Office supplies 4,080 Rent expense Land 46,020 Office equipment 18,860 Telephone expense Accounts payable 9,280 Owner investments 84,920 Miscellaneous expenses $ 2,930 16,950 4,420 7,900 860 680 Exercise 1-18 (Algo) Preparing an income statement LO P2 Using the above information prepare a December income statement for the business. ERNST CONSULTING Income Statement Revenues Rent expense Salaries expense Telephone expense Total revenues $ 4,420 7,900 860 $ SA Assets Cash 8,450 Accounts receivable 16,950 Office supplies 4,080 Land 46,020 Office equipment 18,860 navable 9,280 13,180 5 11 of 14 Next >arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





