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ACCT-Week 4 Exercises E12-1, E12-5, E12-7, and E12-14 E 12?1: Securities held-to-maturity;bond investment...




Question;Exercises E12-1, E12-5, E12-7, and E12-14;E 12?1: Securities held-to-maturity, bond;investment, effective interest;LO12?1;Tanner-UNF Corporation acquired as a long-term investment $240 million;of 6% bonds, dated July 1, on July 1, 2013. Company management has the positive;intent and ability to hold the bonds until maturity. The market interest rate;(yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200;million for the bonds. The company will receive interest semiannually on June;30 and December 31. As a result of changing market conditions, the fair value;of the bonds at December 31, 2013 was $210 million.;Required;1. Prepare the journal entry to;record Tanner-UNF?s investment in the bonds on July 1, 2013.;2. Prepare the journal entry by Tanner-UNF to record interest on;December 31, 2013, at the effective;(market) rate.;3. At what amount will Tanner-UNF report its investment in the December;31, 2013, balance sheet? Why?;4. Suppose Moody?s bond rating agency downgraded the risk rating of the;bonds motivating Tanner-UNF to sell the investment on January 2, 2014, for $190;million. Prepare the journal entry to record the sale.;12?5: Various transactions relating to;trading securities;LO12?2;Rantzow-Lear Company buys and sells securities expecting to earn profits;on short-term differences in price. The company?s fiscal year ends on December;31. The following selected transactions relating to Rantzow-Lear?s trading;account occurred during December 2013 and the first week of 2014.;2013;Dec. 17 Purchased 100,000 Grocers? Supply Corporation preferred shares;for $350,000.;28 Received cash dividends of $2,000 from the Grocers? Supply;Corporation preferred shares.;31 Recorded any necessary adjusting entry relating to the Grocers?;Supply Corporation preferred shares. The market price of the stock was $4 per;share.;2014;Jan.5 Sold the Grocers? Supply Corporation preferred shares for;$395,000.;Required;1. Prepare the appropriate journal entry for each transaction.;2. Indicate any amounts that Rantzow-Lear Company would report in its;2013 balance sheet and income statement as a result of this investment.;E 12?7: Securities available-for-sale;adjusting entries;LO12?3;Loreal-American Corporation purchased several marketable securities;during 2013. At December 31, 2013, the company had the investments in common;stock listed below. None was held at the last reporting date, December 31;2012, and all are considered securities available-for-sale.;Required;1. Prepare the appropriate adjusting entry;at December 31, 2013.;2.;What amounts would be reported;in the income statement at December 31, 2013, as a result of the adjusting;entry?;E 12?14: Investment securities and equity method investments compared;LO12?3, LO12?4, LO12?5;As a long-term investment, Painters? Equipment Company purchased 20% of;AMC Supplies Inc.?s 400,000 shares for $480,000 at the beginning of the fiscal;year of both companies. On the purchase date, the fair value and book value of;AMC?s net assets were equal. During the year, AMC earned net income of $250,000;and distributed cash dividends of 25 cents per share. At year-end, the fair;value of the shares is $505,000.;Required;1.;Assume no significant influence;was acquired. Prepare the appropriate journal entries from the purchase through;the end of the year.;2.;Assume significant influence;was acquired. Prepare the appropriate journal entries from the purchase through;the end of the year.


Paper#37831 | Written in 18-Jul-2015

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