- •Reporting Category:
- •102. Jeremiah Corporation purchased securities during 2006 and classified them as securities available for sale:
- •Problems
- •Required:
- •Required:
- •Required:
- •Required:
- •117. Fkg Inc. Carries the following investments on its books at December 31, 2006, and December 31, 2007. All securities were purchased during 2006.
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •123. Jackson Company engaged in the following investment transactions during the current year.
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Note b - short-term investments
- •133. Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •143. From time to time, debt and equity securities must be reclassified when conditions and circumstances surrounding the investment change.
- •Required:
- •144. Discuss the following questions.
- •Required:
- •Required:
- •Required:
- •147. In its 2001 annual report to shareholders, Maytag Corporation included the following disclosures in its income statement and related footnotes:
- •Special Charges and Loss on Securities
117. Fkg Inc. Carries the following investments on its books at December 31, 2006, and December 31, 2007. All securities were purchased during 2006.
-
Trading Securities:
Company
Cost
Value, Dec. 31, 2006
Value, Dec. 31, 2007
A Company
$25,000
$13,000
$20,000
B Company
$13,000
$20,000
$20,000
C Company
$35,000
$30,000
$25,000
Available for Sale Securities:
Company
Cost
Value, Dec. 31, 2006
Value, Dec. 31, 2007
X Company
$210,000
$130,000
$50,000
Y Company
$ 50,000
$ 60,000
$70,000
Required:
-
Prepare the necessary journal entries for FKG on December 31, 2006, and December 31, 2007.
-
What net effect would the valuation of these stock investments have on 2006 net income? On 2007 net income?
Answer:
(1.)
-
2006:
Unrealized holding loss on investments
12,000
Investment in A
12,000
Investment in B
7,000
Unrealized holding gain on investments
7,000
Unrealized holding loss on investments
5,000
Investment In C
5,000
Unrealized holding loss on investments
80,000
Investment in X
80,000
Investment in Y
10,000
Unrealized holding gain on investments
10,000
2007:
Investment in A
7,000
Unrealized holding gain on investments
7,000
NO ENTRY FOR B SHARES
Unrealized holding loss on investments
5,000
Investment in C
5,000
Unrealized holding loss on investments
80,000
Investment in X
80,000
Investment in Y
10,000
Unrealized holding gain on investments
10,000
(2.)
2006: Net Income would be reduced by $10,000 due to the net unrealized loss on trading securities on companies A, B, and C.
2007: Net Income would be increased by $2,000 due to the net unrealized gain on trading securities on companies A, B, and C.
The holding gains and losses on the securities available for sale are reported as a separate component of shareholders' equity on the balance sheet and do not affect the income statement.
Learning Objective: 3 Level of Learning: 3
118. On February 2, 2006, MBH Inc. acquired 30% of the voting common stock of Construction Corporation as a long-term investment. Data from Construction Corporation's financial statements for the year ended December 31, 2006, include the following:
Net income $150,000
Dividends paid $75,000