![Financial Accounting Fundamentals:](https://www.bartleby.com/isbn_cover_images/9780078025754/9780078025754_largeCoverImage.gif)
1.1
Prepare the journal entries to record the given transactions.
1.1
![Check Mark](/static/check-mark.png)
Explanation of Solution
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities.
Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses.
Prepare the journal entries to record the given transactions as follows:
Date | Account Titles and Description | Post Ref. | Debit ($) | Credit ($) |
January 5, 2015 | Long-Term Investments - Company B | 200,500 | ||
Cash | 200,500 | |||
(To record the purchase of Company B’s shares. | ||||
August 1, 2015 | Cash (1) | 21,000 | ||
Long-term investment-Company B | 21,000 | |||
(To record the cash dividend received) | ||||
December 31, 2015 | Long-Term Investments - Company B | 20,500 | ||
Earnings from long-term investment (2) | 20,500 | |||
(To record the earnings from long-term investment) | ||||
August 1, 2016 | Cash (3) | 27,000 | ||
Long-term investment-Company B | 27,000 | |||
(To record the cash dividend received) | ||||
December 31, 2016 | Long-Term Investments - Company B | 19,500 | ||
Earnings from long-term investment (4) | 19,500 | |||
(To record the earnings from long-term investment) | ||||
January 8, 2017 | Cash | 375,000 | ||
Gain on sale of investment (6) | 192,500 | |||
Long-term investment – Company B (5) | 182,500 | |||
(To record sale of investment and gain from sale of investment) |
Table (1)
Working note:
Calculate the dividend revenue received from Company B for the year 2015
Calculate the earnings from long-term investment for the year 2015
Calculate the dividend revenue received from Company B for the year 2016
Calculate the earnings from long-term investment for the year 2016
Calculate the book value of investment
Book value of investment at the year-end 2016 | |
Particulars | $ |
Original cost | 200,500 |
Less: 2015 dividends | (21,000) |
Add: 2015 earnings | 20,500 |
Book value of investment at the year-end 2015 | 200,000 |
Less: 2016 dividends | (27,000) |
Add: 2016 earnings | 19,500 |
Book value of investment at the yearend 2016 | 192,500 |
Table (2) (5)
Calculate the gain (loss) from sale of long-term investment.
1.2
Ascertain the carrying (book) value per share of Company Bk’s investments in Company B common stock.
1.2
![Check Mark](/static/check-mark.png)
Explanation of Solution
Ascertain the carrying (book) value per share of Company Bk’s investments in Company B common stock as follows:
Therefore, the carrying value per share at the end of the January 1, 2017 is $9.63.
1.3
Ascertain the net increase or decrease in Company Bk’s equity from January 5, 2015 through January 2, 2017 resulting from its investment in Company B.
1.3
![Check Mark](/static/check-mark.png)
Explanation of Solution
Ascertain the net increase or decrease in Company Bk’s equity from January 5, 2015 through January 2, 2017 resulting from its investment in Company B as follows:
Therefore, the net increase in Company B’s equity from January 5, 2015 through January 2, 2017 is $222,500.
2.1
Prepare the journal entries to record the given transactions.
2.1
![Check Mark](/static/check-mark.png)
Explanation of Solution
Journal entry:
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities.
Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses.
Prepare the journal entries to record the given transactions as follows:
Date | Account Titles and Description | Post Ref. | Debit ($) | Credit ($) |
January 5, 2015 | Long-Term Investments - Company B | 200,500 | ||
Cash | 200.500 | |||
(To record the purchase of Company B’s shares. | ||||
August 1, 2015 | Cash (7) | 21,000 | ||
Dividend revenue | 21,000 | |||
(To record the cash dividend received) | ||||
December 31, 2015 | Fair value adjustment | 37,500 | ||
Unrealized gain – Equity (9) | 37,500 | |||
(To record the earnings from long-term investment) | ||||
August, 1 2016 | Cash (10) | 27,000 | ||
Dividend revenue | 27,000 | |||
(To record the cash dividend received) | ||||
December 31, 2016 | Fair value adjustment | 35,000 | ||
Unrealized gain – Equity (12) | 35,000 | |||
(To record the earnings from long-term investment) | ||||
January 2, 2017 | Cash | 375,000 | ||
Gain on sale of investment (13) | 200,500 | |||
Long-term investment – Company B | 174,500 | |||
(To record sale of investment and gain from sale of investment) | ||||
January 2, 2017 | Fair value adjustment | 72,500 | ||
Unrealized gain – Equity (14) | 72,500 | |||
(To record the earnings from long-term investment) |
Table (1)
Working note:
Calculate the dividend revenue received from Company B for the year 2015
Calculate the total fair value of investment at the end of the year 2015
Calculate the value of unrealized gain or loss
Calculate the dividend revenue received from Company B for the year 2016
Calculate the total fair value of investment at the end of the year 2015
Calculate the value of unrealized gain or loss
Calculate the gain (loss) from sale of long-term investment.
Calculate the amount of fair value adjustment
2.2
Ascertain the carrying (book) value per share of Company B’s investments in Company B common stock.
2.2
![Check Mark](/static/check-mark.png)
Explanation of Solution
Ascertain the carrying (book) value per share of Company B’s investments in Company B common stock as follows:
Therefore, the carrying value per share at the end of the January 1, 2017 is $10.03.
2.3
Ascertain the net increase or decrease in Company B’s equity from January 5, 2015 through January 2, 2017 resulting from its investment in Company B.
2.3
![Check Mark](/static/check-mark.png)
Explanation of Solution
Ascertain the net increase or decrease in Company B’s equity from January 5, 2015 through January 2, 2017 resulting from its investment in Company B as follows:
Therefore, the net increase in Company B’s equity from January 5, 2015 through January 2, 2017 is $222,500.
Want to see more full solutions like this?
Chapter C Solutions
Financial Accounting Fundamentals:
- Please help with accountingarrow_forwardAccounting problem with solutionarrow_forwardHome Insert Draw Page Layout Formulas Data Review View Automate Developer Calibri (Body) 12 ✓ Α Αν Conditional Formatting ✓ ☑Insert v Σ Custom Paste B I U ✓ ✓ $ ✓ %9 0 .00 →0 Format as Table ✓ Cell Styles ▾ Delete ✓ Format ✓ C26 fx A B D E F G 1 Instruction: 2 1. Please complete the following budget plan using appropriate cell references format (the cells highlighted in grey) 3 2. Please use fill handler to complete the table. E.g. in cell C16, build one formula and generate other formulas to D16 and E16 with fill handler. 4 3. For "Cost of Goods Sold" section (before "COGS Subtotal"), build one formula in cell C19, and generate formulas until E21. Overhead (B21) is 20% (B10) of the labor cost (B20). 5 4. For "COGS Subtotal", build one formula in C22, and generate the formulas to E22. 6 5. Similar requirements for "Selling Expenses" and "Projected Earnings" section. 7 6. Please be noted, for all items under "Cost of Goods Sold", and "Selling Expenses" the cost is per ONE shoe, not per…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
![Text book image](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)