- •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
Required:
-
Prepare the appropriate journal entries to record the transactions for the year, including any year-end adjustments. Show calculations, rounded to the nearest dollar.
-
Assuming that these Treasury bonds were acquired as trading securities, explain whether any premium or discount should be amortized.
Answer:
-
(1.)
Mar. 1
Interest receivable ($100,000 x 6% x 2/12)
1,000
Investment in Treasury bonds ($100,000 x 103%)
103,000
Cash
104,000
Jul. 1
Cash ($100,000 x6% x 6/12)
3,000
Interest revenue
2,000
Interest receivable
1,000
Dec. 31
Interest receivable
3,000
Interest revenue
3,000
(2.)
Premiums or discounts are not amortized on trading securities.
Learning Objective: 3 Level of Learning: 3
125. On January 1, 2006, Wildcat Company purchased $93,000 of 10% bonds at face value. The bonds are to be held to maturity. The bonds pay interest semiannually on January 1, and July 1.
Required:
-
Prepare the appropriate journal entry to record the acquisition of the bonds.
-
Record the first two interest payments (ignore year-end accruals).
Answer:
-
(1.)
01/1/06
Investment in bonds
93,000
Cash
93,000
(2.)
07/1/06
Cash ($93,000 x 10% x 6/12)
4,650
Interest revenue
4,650
01/1/07
Cash
4,650
Interest revenue
4,650
Learning Objective: 1 Level of Learning: 3
126. On January 1, 2006, Hoosier Company purchased $930,000 of 10% bonds at face value. The bond market value was $980,000 on December 31, 2006.
Required:
Prepare the appropriate journal entry on December 31, 2006, to properly value the bonds assuming the bonds are classified as (ignore premium or discount amortization):
-
Trading securities.
-
Securities available for sale.
-
Held-to-maturity securities.
Answer:
-
(1.)
Investment in bonds ($980,000 - $930,000)
50,000
Unrealized holding gain on investments
50,000
(2.)
Same as above.
(3.)
Changes in FMV of held-to-maturity securities are ignored.
Learning Objective: 1 Level of Learning: 3
127. On January 1, 2006, Bactin Corporation acquired 10% of Oakton Company for $100,000. On that date, the book value and fair value of Oakton's net assets was $900,000. Any difference between cost and book value is attributable to goodwill. In 2006, Oakton reported net income of $60,000 and paid dividends of $30,000. On January 1, 2007, Bactin Corporation bought another 10% of Oakton for $100,000. The value of net assets was $900,000. In 2007, Oakton reported net income of $80,000 and paid dividends of $40,000.