Investments

Vilander Carecenters Inc. provides financing and capital to the healthcare industry, with a particular focus on nursing homes for the elderly. the following selected transactions relate to bonds acquired as an invenstment by Vilander, whose fiscal year ends on December 31.

2018
Jan. 1Purchased at face value $2,000,000 of Javier Nursing Centers, Inc., 10-year, 8% bonds dated January 1, 2018, directly from Javier.
Dec. 31Accrual of interest at year-end on the Javier bonds

(Assume that all intervening transactions and adjustments have been properly recorded and hat the number of bonds owned has not charged from December 31, 2018, to December 31, 2020.)

2021
Jan. 1Received the annual interest on the Javier bonds
Jan. 1Sold $1,000,000 Javier bonds at 106.
Dec. 31Accrual of interest at year-end on the Javier bonds

Instructions

  1. Journalize the listed transactions for the years 2018 and 2021
  2. Assume that the fair value of the bonds at December 31, 2018, was $2,200,000. These bonds are classified as available for sale securities. Prepare the adjusting entry to record these bonds at fair value.
  3. Based on your analysis in part(b), show the balance sheet presentation of the bonds and interest receivable at December 31, 2018. Assume the investments are considered long-term. Indicate where any unrealized gain or loss is reported in the financial statements

In January 2020, the management of Kinzie Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

Feb. 1Purchased 600 shares of Muninger common stock for $32,400
Mar. 1Purchased 800 shares of Tatman common stock for $32,400
Apr. 1Purchased 50 $1,000, 7% Yoakem bonds for $50,000. Interest is payable semiannually on April 1 and October 1.
July 1Received a cash dividend of $0.60 per share on the Muninger common stock
Aug. 1Sold 200 shares of Muninger common stock at $58 per share.
Sept.r. 1Received a $1 per share cash dividend on the Tatman common stock.
Oct. 1Received the semiannual interest on the Yoakem bonds.
Oct. 1Sold the Yoakem bonds for $49,000.

At December 31, the fair value of the Munnger common stock was $55 per share. The fair value of the Tatman common stock was $24 per share

Instructions

  1. Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use T-Accounts form.)
  2. Prepare the adjusting entry at December 31, 2020, to report the investment securities at fair value. All securities are considered to be trading securities.
  3. Show the balance sheet presentation of investment securities at December 31, 2020
  4. Identify the income statement accounts and give the statement classification of each account.

On December 31, 2020, Turnball Associates owned the following securities held as a long-term investment. The securities are not held for influence or control of the investee.

Common StockSharesCost
Gehring Co.2,000$60,000
Wooderson Co.5,00045,000
Kitselton Co.1,50030,000

On December 31, 2020, the total fair value of the securities was equal to its cost. In 2021, the following transactions occurred.

Aug. 1Received $0.50 per share cash dividend on Gehring Co. common stock
Sept. 1Sold 1,500 shares of Wooderson Co. common stock for cash at $8 per share
Oct. 1Sold 800 shares of Gehring Co. common stock for cash at 433 per share
Nov. 1Received $1 per share cash dividend on Kitselton Co. common stock
Dec. 15Received $0.50 per share cash dividend on Gehring co. Common Stock
31Received $1 per share annual cash dividend on Wooderson Co. Common Stock.

At December 31, the fair value per share of the common stocks were Gehring Co. $32, Wooderson Co. $8, and Kitselton Co. $18

Instructions

  1. Journalize the 2021 transactions and post to the account Stock Investments. (Use T-Account form.)
  2. Prepare the adjusting entry at December 31, 2021, to show the securities at fair value. The stock should be classified as available-for-sale securities..
  3. Show the balance sheet presentation of investment securities at December 31, 2021. At this date, Turnball Associates has common stock $1,500,000 and retained earnings $1,000,000.

Heldebrecht Design acquired 20% of the outstanding common stock of Quayle Company on January 1, 2020, by paying $800,000 for the 30,000 shares. Qusyle declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2020. Quayle reported net income of $320,000 for the year. At December 31, 20200, the market price of Quayle common stock was $34 per share

Instructions

  1. Prepare the journal entries for Heidebrecht Design for 2020 assuming Heidebrecht Design cannot exercise significant influence over Quayle. (Use the cost method and assume that Quayle common stock should be classified as a trading security.)
  2. Prepare the journal entries for Heidebrecht Design for 2020 assuming Heidebrecht Design cannot exercise significant influence over Quayle. (Use the equity method)
  3. Indicate the balance sheet and income statement account balances at December 31, 2020, under each method of accounting.

The following securities are in Frederick Company's portfolio of long-term available-for-sale securities at December 31, 2019.

The following data, presented in alphabetical order, are taken from the records of Nieto Corporation.

Jenek Corporation had the following transactions pertaining to debt investments

  1. Purchased 50 9%, $1,000 Leeds Co.bonds for $50,000 cash. Interest is payable annually on January 1, 2020.
  2. Accrued interest on Leeds Co. bonds on December 31, 2020.
  3. Received interest on Leads Co. bonds on January 1, 2021.
  4. Sold 30 Leeds Co. bonds for $33,000 on January 1, 2021.

Instructions

Journalize the transactions.

Flynn Company purchased 70 Rinehart Company 6%, 10- year, $1,000 bonds on January 1, 2020, for $70,000. The bonds pay interest annually on January 1. On January 1, 2021, after receipt of interest, Flynn Company sold 40 of the bonds for $38,500.

Instructions

Prepare the journal entries to record the transactions described above.

Hulse Company had the following transactions pertaining to stock investments.

Feb. 1Purchased 600 shares of Wade common stock (2%) for $7,200 cash
July 1Received a cash dividend of $1 per share on Wade common stock.
Sept. 1Sold 300 shares of Wade common stock for $4,300 cash.
Dec. 1Received a cash dividend of $1 per share on Wade common stock.

Instructions

  1. Journalize the transactions.
  2. Explain how dividend revenue and the gain (loss) on sale should be reported in the income statement

Nosker Inc. had the following transactions pertaining to investments in common stock.

Jan. 1Purchased 2,500 shares of Escalante Corporation common stock (5%) for $152,000 cash
July 1Received a cash dividend of $3 per share.
Dec. 1Sold 500 shares of Escalante Corporation common stock for $32,000 cash.
Dec. 31Received a cash dividend of $3 per share.

Instructions

Journalize the transactions.

 
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