FINANCIAL ACCT.FUND.(LOOSELEAF)
7th Edition
ISBN: 9781260482867
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter C, Problem 2PSA
1.
To determine
Financial statement analysis:
The company and its users use financial analysis as a way to analyze the company’s financial statements to make investment and business decisions. There are four financial statements that any company should produce for its users for analysis. These are the income statement,
To prepare:
1.
Expert Solution
Explanation of Solution
Journal entries are prepared as follows:
| Date | Account title and explanation | Debit ($) | Credit ($) |
| Year 1 | |||
| Jan. 20 | Debt investment − AFS | 20,500 | |
| Cash | 20,500 | ||
| (to record the purchase of bond) | |||
| Feb. 9 | Debt investment − AFS | 55,440 | |
| Cash | 55,440 | ||
| (to record the purchase of bond) | |||
| June 12 | Debt investment - AFS | 40,500 | |
| Cash | 40,500 | ||
| (to record the purchase of bond) | |||
| Dec. 31 | Fair value adjustment − AFS | 3,910 | |
| Unrealized gain − equity | 3,910 | ||
| (to record the fair value adjustment) | |||
| Year 2 | |||
| Apr. 15 | Cash | 23,500 | |
| Gain on sale of debt investment | 3,000 | ||
| Debt investment - AFS | 20,500 | ||
| (to record the sale of bonds on cash) | |||
| July 5 | Cash | 35,850 | |
| Loss on sale of debt investment | 4,650 | ||
| Debt investment - AFS | 40,500 | ||
| (to record the sale of bonds on cash) | |||
| July 22 | Debt investment − AFS | 13,500 | |
| Cash | 13,500 | ||
| (to record the purchase of notes) | |||
| Aug. 19 | Debt investment − AFS | 15,300 | |
| Cash | 15,300 | ||
| (to record the purchase of bonds) | |||
| Dec. 31 | Fair value adjustment − AFS | 1,175 | |
| Unrealized gain − equity | 1,175 | ||
| (to record the fair value adjustment) | |||
| Year 3 | |||
| Feb. 27 | Debt investment − AFS | 160,800 | |
| Cash | 160,800 | ||
| (to record the purchase of bond) | |||
| June 21 | Cash | 57,600 | |
| Gain on sale of debt investment | 2,160 | ||
| Debt investment − AFS | 55,440 | ||
| (to record the sale of bonds on cash) | |||
| June 30 | Debt investment − AFS | 50,400 | |
| Cash | 50,400 | ||
| (to record the purchase of bonds) | |||
| Aug. 3 | Cash | 9,750 | |
| Loss on sale of debt investment | 3,750 | ||
| Debt investment − AFS | 13,500 | ||
| (to record the sale of bonds) | |||
| Nov. 1 | Cash | 20,475 | |
| Gain on sale of debt investment | 5,175 | ||
| Debt investment − AFS | 15,300 | ||
| (to record the sale of bonds) | |||
| Dec. 31 | Unrealized gain − equity | 3,085 | |
| Fair value adjustment - AFS | 3,085 | ||
| (to record the fair value adjustment) |
Working notes:
Year 1
| Company | Cost ($) | Fair value ($) | Difference ($) |
| J J | 20,500 | 21,500 | 1,000 |
| S | 55,440 | 52,500 | (2,940) |
| M | 40,500 | 46,350 | 5,850 |
| Total | 116,440 | 120,350 | 3,910 |
Year 2
| Company | Cost ($) | Fair value ($) | Difference ($) |
| K | 15,300 | 17,325 | 2,025 |
| S | 13,500 | 12,000 | (1,500) |
| S | 55,440 | 60,000 | 4,560 |
| Total | 84,240 | 89,325 | 5,085 |
| Fair value adjustment account: | |||
| Required balance | $5,085 | ||
| Existence balance | ($3,910) | ||
| Required change | $1,175 | ||
Year 3
| Company | Cost ($) | Fair value ($) | Difference ($) |
| B & D | 50,400 | 54,600 | 4,200 |
| M | 160,800 | 158,600 | (2,200) |
| Total | 211,200 | 213,200 | 2,000 |
| Fair value adjustment account: | |||
| Required balance | $5,085 | ||
| Existence balance | ($2,000) | ||
| Required change | $3,085 | ||
2.
To determine
Financial statement analysis:
The company and its users use financial analysis as a way to analyze the company’s financial statements to make investment and business decisions. There are four financial statements that any company should produce for its users for analysis. These are the income statement, balance sheet, cash flow statement and stockholders’ equity statement.
To prepare: Table showing (a) total cost (b) total fair value adjustment (c) total fair value of portfolio.
2.
Expert Solution
Explanation of Solution
The table is prepared as follows:
| Requirement | Debt investment | Year 1 ($) | Year 2 ($) | Year 3 ($) |
| (a) | Long term AFS securities (cost) | 116,440 | 84,240 | 211,200 |
| (b) | Fair value adjustment − AFS | 3,910 | 5,085 | 2,000 |
| (c) | Long term AFS security (fair value) | 120,350 | 89,325 | 213,200 |
3.
To determine
Financial statement analysis:
The company and its users use financial analysis as a way to analyze the company’s financial statements to make investment and business decisions. There are four financial statements that any company should produce for its users for analysis. These are the income statement, balance sheet, cash flow statement and stockholders’ equity statement.
To prepare:Table showing (a) realized gains or losses and (b) unrealized gains or losses.
3.
Expert Solution
Explanation of Solution
The table showing realized and unrealized gain or losses are prepared as follows:
| Particular | Year 1 ($) | Year 2 ($) | Year 3 ($) |
| Realized gain or (losses) | |||
| Sale of J J | 3,000 | ||
| Sale of M | (4,650) | ||
| Sale of S | 2,160 | ||
| Sale of S L | (3,750) | ||
| Sale of K | 5,175 | ||
| Total realized gain or (losses) | 0 | (1,650) | 3,585 |
| Unrealized gains or (losses) | 3,910 | 5,085 | 2,000 |
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Subject general accounting
Department during the month?
None
Chapter C Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
Ch. C - Prob. 1MCQCh. C - Prob. 2MCQCh. C - Prob. 3MCQCh. C - Prob. 4MCQCh. C - Prob. 5MCQCh. C - Prob. 1DQCh. C - Prob. 2DQCh. C - Prob. 3DQCh. C - Prob. 4DQCh. C - Prob. 5DQ
Ch. C - Prob. 6DQCh. C - Prob. 7DQCh. C - Prob. 8DQCh. C - Prob. 9DQCh. C - Prob. 10DQCh. C - Prob. 11DQCh. C - Prob. 12DQCh. C - Prob. 13DQCh. C - Prob. 14DQCh. C - Prob. 1QSCh. C - Prob. 2QSCh. C - Prob. 3QSCh. C - Prob. 4QSCh. C - Prob. 5QSCh. C - Prob. 6QSCh. C - Prob. 7QSCh. C - Prob. 8QSCh. C - Prob. 9QSCh. C - Prob. 10QSCh. C - Prob. 11QSCh. C - Prob. 12QSCh. C - Prob. 13QSCh. C - Prob. 14QSCh. C - Prob. 15QSCh. C - Prob. 16QSCh. C - Prob. 17QSCh. C - Prob. 18QSCh. C - Prob. 1ECh. C - Prob. 2ECh. C - Prob. 3ECh. C - Prob. 4ECh. C - Prob. 5ECh. C - Prob. 6ECh. C - Prob. 7ECh. C - Prob. 8ECh. C - Prob. 9ECh. C - Prob. 10ECh. C - Transactions in held-to-maturity, trading, and...Ch. C - Prob. 12ECh. C - Prob. 13ECh. C - Prob. 14ECh. C - Prob. 15ECh. C - Prob. 16ECh. C - Prob. 17ECh. C - Prob. 1PSACh. C - Prob. 2PSACh. C - Prob. 3PSACh. C - Prob. 4PSACh. C - Prob. 5PSACh. C - Prob. 6PSACh. C - Prob. 1PSBCh. C - Prob. 2PSBCh. C - Prob. 3PSBCh. C - Prob. 4PSBCh. C - Prob. 5PSBCh. C - Prob. 6PSBCh. C - Prob. 1SPCh. C - Prob. 1GLPCh. C - Prob. 2GLPCh. C - Prob. 1AACh. C - Prob. 2AACh. C - Prob. 3AACh. C - Prob. 1BTNCh. C - Prob. 2BTNCh. C - Prob. 5BTN
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- What is the amount of the net fixed assets?arrow_forward9 A B C D E 4 Ramsey Miller Style, Inc. manufactures a product which requires 15 pounds of direct materials at a cost of $8 5 per pound and 5.0 direct labor hours at a rate of $17 per hour. Variable overhead is budgeted at a rate of $3 per direct labor hour. Budgeted fixed overhead is $433,000 per month. The company's policy is to end each month with direct materials inventory equal to 45% of the next month's direct materials requirement, and finished 7 goods inventory equal to 60% of next month's sales. August sales were 13,400 units, and marketing expects 8 sales to increase by 500 units in each of the upcoming three months. At the end of August, the company had 9 95,850 pounds of direct materials in inventory, and 8,340 units in finished goods inventory. 10 11 August sales 12 Expected increase in monthly sales 13 Desired ending finished goods (units) 14 Selling price per unit 15 Direct materials per unit 16 Direct materials cost 17 Direct labor hours (DLHS) per unit 18 Direct labor…arrow_forwardSherrod, Incorporated, reported pretax accounting income of $84 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2024 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2024 had a balance of $4 million (representing portions of 2023 and 2024 installment sales), expected to be collected equally in 2025 and 2026. b. Sherrod was assessed a penalty of $4 million by the Environmental Protection Agency for violation of a federal law in 2024. The fine is to be paid in equal amounts in 2024 and 2025. c. Sherrod rents its operating facilities but owns one asset acquired in 2023 at a cost of $88 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight- line depreciation the…arrow_forward
- Direct materials price variancearrow_forward$ 36,000 204,000 The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: Cash Noncash assets Liabilities Drysdale, loan $ 50,000 10,000 Total assets $ 240,000 Drysdale, capital (50%) Koufax, capital (30%) Marichal, capital (20%) Total liabilities and capital 70,000 60,000 50,000 $ 240,000 Required: a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. a-2. Liquidation expenses are estimated to be $15,000. Prepare a predistribution schedule to guide the distribution of cash. b. Assume that assets costing $74,000 are sold for $60,000. How is the available cash to be divided? Complete this question by entering your answers in the tabs below.arrow_forwardCalculate GP ratio round answers to decimal placearrow_forward
- What is the gross profit percentage for this periodarrow_forwardThe company's gross margin percentage is ?arrow_forwardProblem 19-13 (Algo) Shoney Video Concepts produces a line of video streaming servers that are linked to personal computers for storing movies. These devices have very fast access and large storage capacity. Shoney is trying to determine a production plan for the next 12 months. The main criterion for this plan is that the employment level is to be held constant over the period. Shoney is continuing in its R&D efforts to develop new applications and prefers not to cause any adverse feelings with the local workforce. For the same reason, all employees should put in full workweeks, even if that is not the lowest-cost alternative. The forecast for the next 12 months is MONTH FORECAST DEMAND January February March April 530 730 830 530 May June 330 230 July 130 August 130 September 230 October 630 730 800 November December Manufacturing cost is $210 per server, equally divided between materials and labor. Inventory storage cost is $4 per unit per month and is assigned based on the ending…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License