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devry acct305 homework 4




Question;Week Four - Homework Exercises E12-1, E12-5, E12-7, and;E12-14;E12-1 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 entries 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.;E12-5 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.;E12-7 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.;Cost Fair Value Unrealized Holding;Gain (Loss);Short term;Blair, Inc.;$480,000 $405,000 $(75,000);ANC Corporation;450,000 480,000 30,000;Totals;$930,000 $885,000 $(45,000);Long term;Drake Corporation;$480,000 $560,000 $80,000;Aaron Industries;720,000 660,000 -60,000;Totals;$1,200,000 $1,220,000 $20,000;Required: 1.;Prepare the appropraite adjusting entry at December 31, 2013;What;amounts would be reported in the income statement at December 31, 2013, as a;result of the adjusting entry?;E12-14 As a long-term;investment, Painters' Equipment Company purcahsed 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#38687 | Written in 18-Jul-2015

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