Accounting Journal Entry
Accounting Journal Entry
Brief Exercise 17-8
Cleveland Company has a stock portfolio valued at $7,490 (available-for-sale). Its cost was $6,960. If the Fair Value Adjustment account has a debit balance of $214, prepare the journal entry at year-end.
| Account Title and Explanation | Debit | Credit |
| Fair value adjustment (Available-for-sale)
Unrealized holding gain or loss-equity |
$316 |
$316 |
Exercise 17-13
Parent Co. invested $1,100,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays out 40% of net income in dividends each year.
Use the information in the following T-account for the investment in Sub to answer the following questions.
| Investment in Sub Co. | |
| 1,100,000 | |
| 141,600 | |
| 56,640 | |
(a) How much was Parent Co.’s share of Sub Co.’s net income for the year?
Net income $141,600
(b) How much was Parent Co.’s share of Sub Co.’s dividends for the year?
Dividends $56,640
(c) What was Sub Co.’s total net income for the year?
100/25 ×$141,600
Total net income $566,400
(d) What was Sub Co.’s total dividend for the year?
100/25 × $56,640
Total Dividends $226,560
Problem 17-3
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.
| Feb. 1, 2014 | Sharapova Company common stock, $111 par, 222 shares | $44,600 | ||
| April 1 | U.S. government bonds, 12%, due April 1, 2024, interest payable April 1 and October 1, 113 bonds of $1,000 par each | 113,000 | ||
| July 1 | McGrath Company 12% bonds, par $54,200, dated March 1, 2014, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2034 | 58,536 |
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.
| Account Title and Explanation | Debit | Credit |
| Debt investment (Available for sale)
Equity investment (Available for sale) Interest revenue ($54,200 × 0.12 × 4/12) Investment |
$169,368
$44,600 $2,168 |
$216,136 |
(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2014, using the straight-line method.
| Date | Account Title and Explanation | Debit | Credit |
| Dec. 31, 2014
|
Interest Received
Interest Revenue Debt Investment |
$8,810 |
$55 $8,755 |
Accrued interest
$54,200 × 0.12 × 10/12 = $5,420
Premium Amortization
6/236 × 2,168 = ($55)
Accrued interest
$113,000 × 0.12 × 3/12 = $3,390
Total = $8,755
(c) The fair values of the investments on December 31, 2014, were:
| Sharapova Company common stock | $33,180 | |
| U.S. government bonds | 146,730 | |
| McGrath Company bonds | 64,740 |
| December 31, 2014
Available-for-Sale Portfolio |
| Securities Cost Fair Value Unrealized Gain (Loss) |
| Sharapova Company stock $44,600 $33,180 $(11,420)
U.S. government bonds 113,000 146,730 33,730 McGrath Company bonds 56,313* 64,740 8,427 Total $213,913 $244,650 $30,737 |
($54,200 × 1.04) -$55 = $56,313*
What entry, if any, would you recommend be made?
| Date | Account Title and Explanation | Debit | Credit |
| Dec. 31, 2014 | Fair value adjustment (Available for sale)
Unrealized holding gains or loss-equity |
$30,737 |
$30,737 |
(d) The U.S. government bonds were sold on July 1, 2015, for $121,190 plus accrued interest. Give the proper entry.
| Date | Account Title and Explanation | Debit | Credit |
| Jul. 1, 2015 | Cash ($121,190 + $3,390)
Available-for-sale securities Gains on sale securities Interest revenue |
$124,580 |
$113,000 $8,190 $3,390 |
Do you need an Original High Quality Academic Custom Essay?
