Cooper 1
Aleshia CooperThursday, 06 February, 2014Accounts 305 -01Mr.
Terrance Richards Homework Questions: E: 17-3, 4, 5, 6,7,11, 13,
14, And 15
Exercise: 17-3
DATEACCOUNT DebitCredit
Debt Investments322,744.44
Cash322,744.44
Schedule of Interest Revenue and Bond Premium
AmortizationEffective-Interest Method12% Bonds Sold to Yield
10%DateCash ReceivedInterest RevenuePremium AmortizedCarrying
Amount of Bonds
1/1/13$322,744.44
12/31/13$36,000$32,274.44$3,725.56319,018.88
12/31/1436,00031,901.894,098.11314,920.77
12/31/1536,00031,492.084,507.92310,412.85
12/31/1636,00031,041.294,958.71305,454.14
12/31/1736,00030,545.865,454.14300,000.00
DATEACCOUNT DebitCredit
Debt Investments322,744.44
Cash322,744.44
DATEACCOUNT DebitCredit
Cash36,000
Debt Investments 3,725.56
Interest Revenue32,274.44
DATEACCOUNT DebitCredit
Cash36,000
Debt Investments4,098.11
Interest Revenue31,901.89
Exercise: 17-4
DATEACCOUNT DebitCredit
Debt Investments322,744.44
Cash322,744.44
DATEACCOUNT DebitCredit
Cash36,000
Debt Investments 3,725.56
Interest Revenue32,274.44
DATEACCOUNT DebitCredit
Debt Investments36,000
Cash36,000
DATEACCOUNT DebitCredit
Debt Investments7,401.89
Cash7,401.89
Amortized CostFair ValueUnrealized Gain (Loss)
Available-for-sale bonds$314,920.77$309,000.00$(5,920.77)
Previous fair value adjustmentDr. 1,481.12
Fair value adjustmentCr.$(7,401.89)
Exercise: 17-5
Schedule of Interest Revenue and Bond Discount Amortization
Straight-line Method
9% Bond Purchased to Yield 12%
DateCashReceivedInterestRevenueBondDiscountAmortizationCarryingAmountof
Bonds
Jan 1, 13185,589.00
Dec 31, 1318,000.00 22,803.67 4,803.67 190,392.67
Dec 31, 1418,000.00 22,803.67 4,803.67 195,196.33
Dec 31, 1518,000.00 22,803.67 4,803.67 200,000.00
Schedule of Interest Revenue and Bond Discount Amortization
Effective Interest Method
9% Bond Purchased to Yield 12%
DateCashReceivedInterestRevenueBondDiscountAmortizationCarryingAmountof
Bonds
Jan 1, 13185,589.00
Dec 31, 1318,000.00 22,270.68 4,270.68 189,859.68
Dec 31, 1418,000.00 22,783.16 4,783.16 194,642.84
Dec 31, 1518,000.00 23,357.14 5,357.14 199,999.98
DATEACCOUNT DebitCredit
Cash18,000.00
Held-to-Maturity Securities4,803.67
Interest Revenue22,803.67
DATEACCOUNT DebitCredit
Cash18,000.00
Held-to-Maturity Securities4,783.16
Interest Revenue22,783.16
Exercise: 17-6
DATEACCOUNT DebitCredit
Fair Value Adjustment5,000
Unrealized Holding Gain or LossIncome
5,000
DATEACCOUNT DebitCredit
Fair Value Adjustment5,000
Unrealized Holding Gain or LossEquity
5,000
Exercise: 17-7
DATEACCOUNT DebitCredit
Unrealized Holding Gain or LossIncome
1,400
Fair Value Adjustment1,400
DATEACCOUNT DebitCredit
Cash9,400
Held-to-Maturity Securities600
Interest Revenue10,000
SecuritiesCostFair ValueUnrealized Gain (Loss)
Clemson Corp. stock$20,000$19,100($ (900)
Buffaloes Co. stock 20,000 20,500( 500)
Total of portfolio$40,000$39,600( (400)
Previous fair value adjustment balanceCr.( (1,400)
Fair value adjustmentDr.($1,000)
Exercise: 17-11
The total purchase price of these investments is:
Sanchez: (10,000 X $33.50) + $1,980 = $336,980Vicario: (5,000 X
$52.00) + $3,370 = $263,370WTA: (7,000 X $26.50) + $4,910 =
$190,410
DATEACCOUNT DebitCredit
Debt Investments (Held-to-Maturity)300,000
Cash300,000
DATEACCOUNT DebitCredit
Cash36,000
Interest Revenue ($300,000 12.00%)36,000
Gross selling price of 4,000 shares at $35$140,000Less:
Commissions, taxes, and fees (3,850)Net proceeds from sale
136,150Cost of 4,000 shares ($336,980 X 0.4) (134,792)Gain on sale
of stock $ 1,358
DATEACCOUNT DebitCredit
Unrealized Holding Gain or LossIncome
1,400
Fair Value Adjustment1,400
SecuritiesCostFair ValueUnrealized Gain (Loss)
Sanchez Co.$202,188$180,000$(22,188)
Vicario Co.263,370275,000(11,630
WTA Co. 190,410 196,000 5,590
Total portfolio value$655,968$651,000(4,968)
Previous fair value adjustment balance 0
Fair value adjustmentCr.$ (4,968)
Exercise: 17-13
a)$110,000, the increase to the Investment account.(b)If the
dividend payout ratio is 40%, then 40% of the net income is their
share of dividends = $44,000.(c)Their share is 25%, so, Total Net
Income X 25% = $110,000Total Net Income = $110,000 25% =
$440,000(d)$44,000 25% = $176,000 or $440,000 X 40% = $176,000
Exercise: 17-14
DATEACCOUNT DebitCredit
Unrealized Holding Gain or LossIncome
7,900
Fair Value Adjustment7,900
DATEACCOUNT DebitCredit
Cash63,850
Equity Investments (Available-for-Sale)58,500
Gain on Sale of Stock5,350
DATEACCOUNT DebitCredit
Equity Investments (Available-for-Sale)35,480
Cash35,480
Exercise: 17-15
DATEACCOUNT DebitCredit
Unrealized Holding Gain or LossIncome
7,900
Fair Value Adjustment7,900
DATEACCOUNT DebitCredit
Cash [(1,500 X $45) $1,200]66,300
Loss on Sale of Investments7,200
Equity Investments (trading)73,500
DATEACCOUNT DebitCredit
Unrealized Holding Gain or LossIncome
1,400
Fair Value Adjustment1,400
SecuritiesCostFair ValueUnrealized Gain (Loss)
Wallace Corp., Common$180,000$175,000$ (5,000)
Earnhart Corp., Common53,80050,400(3,400)
Martin Inc., Preferred 60,000 58,000 (2,000)
Total portfolio$293,800$283,400(10,400)
Previous fair value adjustmentCr. (7,900)
Fair value adjustmentCr.$ (2,500)
