acct 212 homework 2 chapter 15

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acct 212 homework 2 chapter 15

award:
2 out of
2.00 points

Exercise 15-1 Accounting for short-term held to-maturity securities L.O.
P2

Prepare
journal entries to record the following transactions involving the short-term
securities investments of Maxwell Co., all of which occurred during year
2011.

a.

On
February 15, paid $128,000 cash to purchase FTR’s 90-day short-term debt
securities ($128,000 principal), dated February 15, that pay 9% interest
(categorized as held-to-maturity securities). (Omit the “$” sign in your response.)

b.

On May
16, received a check from FTR in payment of the principal and 90 days’
interest on the debt securities purchased in transaction a. (Do not round your intermediate calculations. Use 360 days
a year. Omit the “$” sign in your response.)

Explanation:

2.

award:
1.72 out of
2.00 points

Exercise 15-2 Accounting for short-term trading securities L.O. P1

Prepare
journal entries to record the following transactions involving the short-term
securities investments of Smart Co., all of which occurred during year 2011.

a.

On
March 22, purchased 820 shares of FIX Company stock at $24 per share plus a
$340 brokerage fee. These shares are categorized as trading securities. (Omit the “$” sign in your response.)

b.

On
September 1, received a $3 per share cash dividend on the FIX Company stock
purchased in transaction a. (Omit
the “$” sign in your response.)

c.

On
October 8, sold 410 shares of FIX Co. stock for $34 per share, less a $330
brokerage fee. (Do not round your
intermediate calculations. Omit the “$” sign in your response.)

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3.

award:
2 out of
2.00 points

Exercise 15-3 Accounting for short-term available-for-sale securities
L.O. P3

Prepare
journal entries to record the following transactions involving the short-term
securities investments of Prairie Co., all of which occurred during year
2011.

a.

On
August 1, paid $64,000 cash to purchase Better Buy’s 11% debt securities
($64,000 principal), dated July 30, 2011, and maturing January 30, 2012
(categorized as available-for-sale securities). (Omit the “$” sign in your response.)

b.

On
October 30, received a check from Better Buy for 90 days’ interest on the
debt securities purchased in transaction a. (Do not round your intermediate calculations. Use 360 days
a year. Omit the “$” sign in your response.)

General Journal

Debit

Credit

Oct.
30

Cash

Interest
revenue


.

award:
2 out of
2.00 points

Exercise 15-6 Accounting for trading securities L.O. P1

Forex
Co. purchases various investments in trading securities at a cost of $51,000
on December 27, 2011. (This is its first and only purchase of such securities.)
At December 31, 2011, these securities had a fair value of $69,000.

1.

Prepare
the December 31, 2011, year-end adjusting entry for the trading securities’
portfolio. (Omit the “$” sign in
your response.)

2.

Prepare
the January 3, 2012, entry when Forex sells a portion of its trading
securities (that had originally cost $25,500) for $30,000. (Omit the “$” sign in your response.)

5.

award:
1 out of
1.00 point

Exercise 15-7 Adjusting available-for-sale securities to fair value L.O.
P3

On
December 31, 2011, Rollo Company held the following short-term investments in
its portfolio of available-for-sale securities. Rollo had no short-term
investments in its prior accounting periods.

Cost

Fair Value

Vicks
Corporation bonds payable

$

66,900

$

62,300

Pace
Corporation notes payable

52,800

44,900

Lake
Lugano Company common stock

86,600

83,800


Prepare
the December 31, 2011, adjusting entry to report these investments at fair value. (Omit the “$” sign in your response.)

6.

award:
2.82 out of
3.00 points

Exercise 15-8 Transactions in short-term and long-term investments L.O.
P1, P2, P3

a.

On
February 15, paid $120,000 cash to purchase American General’s 120-day short-term
notes at par, which are dated February 15 and pay 9% interest (classified as
held-to-maturity).

b.

On
March 22, bought 600 shares of Frain Industries common stock at $35 cash per
share plus a $120 brokerage fee (classified as long-term available-for-sale
securities).

c.

On June
15, received a check from American General in payment of the principal and
120 days’ interest on the notes purchased in transaction a.

d.

On July
30, paid $36,000 cash to purchase MP3 Electronics’ 8% notes at par, dated July
30, 2011, and maturing on January 30, 2012 (classified as trading
securities).

e.

On
September 1, received a $0.54 per share cash dividend on the Frain Industries
common stock purchased in transaction b.

f.

On
October 8, sold 300 shares of Frain Industries common stock for $41 cash per
share, less a $100 brokerage fee.

g.

On
October 30, received a check from MP3 Electronics for three months’ interest
on the notes purchased in transaction d.

Prepare
journal entries to record the above transactions involving both the
short-term and long-term investments of Sophia Corp., all of which occurred
during calendar year 2011. Use the account Short-Term Investments for any
transactions that you determine are short term. (Use 360-days a year. Do not round intermediate
calculations and round your final answers to the nearest dollar
amount. Omit the “$” sign in your response.)

7.

award:
1.40 out of
2.00 points

Exercise 15-11 Multiyear fair value adjustments to available-for-sale
securities L.O. P3

Ticker
Services began operations in 2009 and maintains long-term investments in
available-for-sale securities. The year-end cost and fair values for its
portfolio of these investments follow.

Cost

Fair
Value

December
31, 2009

$

369,070

$

357,998

December
31, 2010

420,740

445,984

December
31, 2011

572,206

676,920

December
31, 2012

864,031

768,988


Prepare
journal entries to record each year-end fair value adjustment for these
securities. (Omit the “$” sign in
your response.)

8.

award:
1.58 out of
2.00 points

Exercise 15-12 Classifying investments in securities; recording fair
values L.O. C1, P2, P3, P4

Information
regarding Central Company’s individual investments in securities during its
calendar-year 2011, along with the December 31, 2011, fair values, follows.

a.

Investment
in Beeman Company bonds: $302,250 cost, $328,546 fair value. Central intends
to hold these bonds until they mature in 2016.

b.

Investment
in Baybridge common stock: 29,500 shares; $240,289 cost; $261,194 fair value.
Central owns 32% of Baybridge’s voting stock and has a significant influence
over Baybridge.

c.

Investment
in Carroll common stock: 12,000 shares; $123,922 cost; $133,588 fair value.
This investment amounts to 3% of Carroll’s outstanding shares, and Central’s
goal with this investment is to earn dividends over the next few years.

d.

Investment
in Newtech common stock: 3,500 shares; $68,913 cost; $67,741 fair value.
Central’s goal with this investment is to reap an increase in fair value of
the stock over the next three to five years. Newtech has 30,000 common shares
outstanding.

e.

Investment
in Flock common stock: 16,300 shares; $75,563 cost; $80,248 fair value. This
stock is marketable and is held as an investment of cash available for
operations.

Required:

1.

Identify
whether each investment should be classified as a short-term or long-term
investment. For each long-term investment, indicate in which of the long-term
investment classifications it should be placed.(Select
“NA” in classification of long-term investment, if the type of
investment is short term.)

2.

Prepare
a journal entry dated December 31, 2011, to record the fair value adjustment
of the long-term investments in available-for-sale securities. Central had no
long-term investments prior to year 2011.(Omit the
“$” sign in your response.)

9.

award:
2 out of
2.00 points

Exercise 15-13 Securities transactions; equity method L.O. P4

Listed
below are a few events and transactions of Kash Company.

2011

Jan.

2

Purchased
70,000 shares of Bushtex Co. common stock for $476,000 cash plus a broker’s
fee of $4,650 cash. Bushtex has 127,273 shares of common stock outstanding
and its policies will be significantly influenced by Kash.

Sept.

1

Bushtex
declared and paid a cash dividend of $3.10 per share.

Dec.

31

Bushtex
announced that net income for the year is $883,275.

2012

June

1

Bushtex
declared and paid a cash dividend of $3.35 per share.

Dec.

31

Bushtex
announced that net income for the year is $990,184.

Dec.

31

Kash
sold 7,000 shares of Bushtex for $371,852 cash.

Prepare
journal entries to record the above transactions and events of Kash Company. (Do not round intermediate calculations and round
your final answers to the nearest dollar amount. Omit the
“$” sign in your response.)

10.

award:
1 out of
1.00 point

Exercise 15-15A Foreign currency transactions L.O. C3

Desi of
New York sells its products to customers in the United States and the United
Kingdom. On December 16, 2011, Desi sold merchandise on credit to Bronson
Ltd. of London at a price of 18,000 pounds. The exchange rate on that day for
£1 was $2.0543. On December 31, 2011, when Desi prepared its financial
statements, the rate was £1 for $2.0481. Bronson paid its bill in full on
January 15, 2012, at which time the exchange rate was £1 for $2.0502. Desi
immediately exchanged the 18,000 pounds for U.S. dollars.

Prepare
Desi’s journal entries on December 16, December 31, and January 15. (Round your intermediate calculations and
final answers to the nearest dollar amount. Omit the “$” sign
in your response.)

11.

award:
2 out of
2.00 points

Exercise 15-16A Computing foreign exchange gains and losses on
receivables L.O. C3

On May
8, 2011, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican
company). The terms of the sale required Lopez to pay 730,000 pesos on
February 10, 2012. Jett prepares quarterly financial statements on March 31,
June 30, September 30, and December 31. The exchange rates for pesos during
the time the receivable is outstanding follow.

May
8, 2011

$

0.1811

June
30, 2011

0.1820

September
30, 2011

0.1831

December
31, 2011

0.1814

February
10, 2012

0.1853


1.

Compute
the foreign exchange gain or loss that Jett should report on each of its
quarterly income statements for the last three quarters of 2011 and the first
quarter of 2012. (Input all amounts as
positive values. Omit the “$” sign in your response.)

2.

Compute
the amount receivable balance of Lopez reported on Jett’s balance sheets at
the end of each of its last three quarters of 2011. (Omit the “$” sign in your response.)

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