Question

In: Accounting

Q5) ( 5 MARKS ) A FIRM PURCHASED( INVESTED IN ) COMMON SHARES OF XYZ CO....

Q5) ( 5 MARKS ) A FIRM PURCHASED( INVESTED IN ) COMMON SHARES OF XYZ CO. WITH FOLLOWING DETAILS NO OF COMMON SHARES BOUGHT 2000 BUYNIG PRICE $40 BROKERAGE CHARGES FOR ALL THE SHARES $200 JOURNALIZE THE FOLLOWING TRANSACTIONS A JOURNALIZE PURCHASE OF INVESTMENT STOCKS AND CALCULATE COST PER SHARE B CALCULATE COST PER SHARE C EARNED $ 3 PER SHARE AS DIVIDEND INCOME (JOURNALIZE ENTRY) D THE FIRM SOLD SHARES TO ABC CO. WITH THE FOLLOWING DETAILS NO OF SHARES SOLD TO ABC CO. 1500 BROKERAGE CHARGES FOR ALL THE SHARES $300 SELLING PRICE $45

Expert Solution

A)

Date	Account title	Debit	credit
A	Investment in XYZ CO.	80200
	Cash		80200

#Working:

Cost of shares purchase = [Number of shares*price per share] +Brokerage

= [2000*40 ] +200

= 80000+200

= 80200

B)Cost per share =Total Cost of shares purchased /Number of shares

= 80200 / 2000

= $ 40.10 per share

C)

Date	Account title	Debit	credit
C	Cash /Dividend receivable	6000
	Dividend revenue (2000*3)		6000

D)

Date	Account title	Debit	credit
D	Cash	67200
	Gain on sale of investment		7050
	Investment in XYZ CO (1500*40.1)		60150

#Working

Net cash Collected from sale of shares = [Number of shares sold *selling price]-Brokerage

= [1500*45 ] -300

= 67500-300

= 67200

ekkarill92 answered 2 years ago

Farms inc. owns 4% of common shares of XYZ. co. at the beginning of the current...

Farms inc. owns 4% of common shares of XYZ. co. at the beginning of the current year the fair value of an investment in XYZ was $250,000. At the end of the year, the fair value had decreased to $245,000. What journal entry would Farms inc. record to adjust the investment of the fair value?

On January 1, 2020, ABC Co. paid $800,000 to acquire common shares of XYZ Co., which...

On January 1, 2020, ABC Co. paid $800,000 to acquire common shares of XYZ Co., which represented 30% of XYZ Co.’s shares outstanding. The value of XYZ’s net assets was $1,850,000 on that date. The excess of the purchase price over ABC’s share of XYZ’s net assets is attributed to unrecorded intangibles with a 20-year life. XYZ earned net income and comprehensive income of $400,000 in 2020 and paid dividends of $80,000. The investment in XYZ had a fair value...

On January 5, 2008, Grace Co. purchased 70% of the outstanding shares of Leo Co. at...

On January 5, 2008, Grace Co. purchased 70% of the outstanding shares of Leo Co. at a cost of P500,000. On that date, the outstanding ordinary shares of Leo had a P700,000 balance, while accumulated profits had a P100,000 balance. All the book values of assets and liabilities of Leo approximated their fair values except for an equipment which was understated by P50,000 For the year 2008, Grace sold an equipment to Leo reporting a gain on sale of P25,000...

On January 2, 2018, Acquirer Co acquires 10,000 shares (5%) of Target Inc’s shares of common...

On January 2, 2018, Acquirer Co acquires 10,000 shares (5%) of Target Inc’s shares of common stock for $42 a share. Acquirer held the Target shares until January 9, 2020 when it sells the stock for $48 a share. Target reported the following earnings/loss per share, paid the following cash dividends per share, and the trading price of each share of its common stock are as follows: Year Earnings/Loss per share 12/31/Cash Dividends per sh Fair Mkt Value 12/31 per...

ON JANUARY 1, 2016 FLORIDA PURCHASED ALL THE OUTSTANDING COMMON SHARES OF SUNSHINE CO FOR $3,500,000...

ON JANUARY 1, 2016 FLORIDA PURCHASED ALL THE OUTSTANDING COMMON SHARES OF SUNSHINE CO FOR $3,500,000 CASH.AT THE DATE OF ACQUISITION, SUNSHINE EQUITY ACCOUNTS HAD THE FOLLOWING BALANCES: COMMON STOCK$500,000 PAID IN CAPITAL$1,800,000 RETAINED EARNINGS$700,000 ALL OF SUNSHINE'S ASSETS WERE FAIRLY STATED EXCEPT FOR THE FOLLOWING: EQUIPMENT: BOOK VALUE $180,000, FAIR VALUE $270,000, EST LIFE 5 YEARS BUILDING: BOOK VALUE $600,000, FAIR VALUE $800,000, EST LIFE 10 YEARS SUNSHINE ALSO HAD A COPYRIGHT WITH A FAIR VALUE OF $160,000 WITH...

On January 1st, 2018, MTU Inc. purchased 25,000 of the 100,000 common shares of Blizzard Co....

On January 1st, 2018, MTU Inc. purchased 25,000 of the 100,000 common shares of Blizzard Co. for $14 per share. Blizzard declared a dividend of $30,000 on June 30th, 2018. On Dec. 31, 2018, Blizzard reported net income of $400,000 and the fair market value of its stock at that point in time was $18 per share. Prepare all necessary journal entries relating to this investment for MTU Inc.

On January 1, 2017, Wayne Co. purchased 80,000 shares (40%) of the common stock of Grayson...

On January 1, 2017, Wayne Co. purchased 80,000 shares (40%) of the common stock of Grayson Corp., paying $1,000,000. At that time Grayson Corp. book value was $2,250,000. Grayson had a equipment undervalued by $100,000 and a useful life of 5 years. Any other excess fair value from this transaction was attributable to good will. During 2015, Grayson reported income of $400,000 and paid dividends of $160,000. At the close of business on 12/31/2017, Wayne Co. sold 10,000 shares (or...

On 1 january 2018, Abc Co purchased assets of XYZ Co at auction for $1,560,000. An...

On 1 january 2018, Abc Co purchased assets of XYZ Co at auction for $1,560,000. An independent appraisal of the fair value of the assets acquired is listed below: Land $171,600 Building $514, 800 Equipment $600,000 Inventories $429,000 On 1 september 2018, ABC Co exchanged land and cash of $8000 for a plant. The land had a book value of $55,000 and a fair value of $60,000. The exchange has commercial susbtance. On 31 November 2018, ABC co sold equipment...

On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the...

On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in exchange for $17,100. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common Stock Fair Value (12/31) 2019 $313,000 2020 $68,000 $6,600 380,000 2021 85,000 14,400 470,000 At December 31, 2020, Zip reports a net...

On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the...

On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $15,500. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common Stock Fair Value (12/31) 2016 $325,000 2017 $82,000 $7,400 380,000 2018 94,000 14,800 477,000 At December 31, 2017, Zip reports a net...