University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

379

Pages:

2
Author:

stud_ice13

Problem C-1B: Trading Debt Securities 1. Record Journal Entries for Transactions: o Purchases: Debit "Trading Debt Securities" and credit "Cash" for each bond purchase (Target, Kroger, Ford, Marshall). o Sales: Recognize gains or losses on sales by debiting "Cash" for sale proceeds, crediting "Trading Debt Securities" at cost, and recording any difference in "Gain/Loss on Sale of Securities." 2. Year-End Cost and Fair Value Comparison Table: o List each bond (Target, Kroger, Marshall), its cost, and fair value. 3. Year-End Fair Value Adjustment: o Calculate the adjustment needed for the trading securities' portfolio by comparing the total fair value and total cost, then prepare an adjusting entry. Problem C-2B: Available-for-Sale Debt Securities 1. Record Journal Entries for Transactions: o Purchases and Sales: Similar to C-1B, record entries for bond purchases and sales, including realized gains or losses. 2. Year-End Fair Value Adjustment Entries: o For each year, record unrealized gains or losses by comparing cost and fair values. 3. Year-End Portfolio Summary: o Create a table each year to summarize:  Total Cost: Sum of investments’ costs.  Fair Value Adjustment: Adjust for unrealized gains/losses.  Total Fair Value: Adjusted fair value of the portfolio. 4. Realized and Unrealized Gains/Losses Table: o Summarize realized (recorded upon sale) and unrealized (based on fair value adjustments) gains or losses at each year-end. Problem C-3B: Available-for-Sale Securities - Realized and Unrealized Gains and Losses 1. Journal Entries for Transactions: o Record bond purchases, partial or full sales, and calculate gains/losses. 2. December 31 Adjusting Entry for Fair Value: o Compare year-end fair values with adjusted costs, then record an adjusting entry to reflect fair value changes. 3. December 31 Balance Sheet Valuation: Use adjusted fair values to determine the portfolio value. 4. Income Statement Gains or Losses: o Recognize realized gains or losses from sales on the income statement. o Problem C-4B: Short-Term Stock Investments with Insignificant Influence 1. Record Journal Entries for Transactions: o Record stock purchases, dividends received (recognized as income), and any partial sales. 2. Year-End Cost and Fair Value Comparison Table: o Compare cost and year-end fair values for each stock (Nokia, Dell, Merck) and calculate necessary adjustments. 3. Year-End Fair Value Adjustment: o Adjust for unrealized gains or losses in the short-term investment portfolio. 4. Current Asset Section of Balance Sheet: o Reflect the adjusted fair values in the current asset section. 5. Impact on Income Statement and Equity: o Summarize realized and unrealized gains/losses to show changes in income and equity. Problem C-5B: Long-Term Stock Investments with Significant Influence 1. Record Journal Entries for Investments in Bloch Stock: o Use the Equity Method since there’s significant influence (25% ownership). o Record the initial investment, share of net income, dividends received, and any gains or losses on partial sales. Problem C-6B: Long-Term Stock Investments without Significant Influence 1. Record Journal Entries under Fair Value Method: o Assume Brinkley does not exert significant influence despite the 25% ownership. o Use the Fair Value Method: Recognize dividends as income, adjust for fair value changes, and record gains or losses on sales.