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In: Accounting
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance:DebitCreditAccounts payable$53,700Accounts receivable$41,000Additional paid-in capital50,000Buildings (net) (4-year remaining life)184,000Cash and short-term investments77,250Common stock250,000Equipment (net) (5-year remaining life)400,000Inventory117,500Land107,500Long-term liabilities (mature 12/31/20)173,000Retained earnings, 1/1/17417,450Supplies16,900Totals$944,150$944,150During 2017, Abernethy reported net income of $98,000 while declaring and paying dividends of $12,000. During 2018, Abernethy reported net income of $128,250 while declaring and paying dividends of $39,000.Assume that Chapman Company acquired Abernethy’s common stock for $851,300 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $124,200, its buildings were valued at $254,400, and its equipment was appraised at $378,500.
Chapman uses the equity method for this investment.Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
In: Accounting
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance:DebitCreditAccounts payable$55,100Accounts receivable$44,700Additional paid-in capital50,000Buildings (net) (4-year remaining life)163,000Cash and short-term investments83,750Common stock250,000Equipment (net) (5-year remaining life)207,500Inventory122,000Land85,500Long-term liabilities (mature 12/31/20)162,500Retained earnings, 1/1/17202,150Supplies13,300Totals$719,750$719,750During 2017, Abernethy reported net income of $105,000 while declaring and paying dividends of $13,000. During 2018, Abernethy reported net income of $136,750 while declaring and paying dividends of $36,000.Assume that Chapman Company acquired Abernethy’s common stock for $612,390 in cash. Assume that the equipment and long-term liabilities had fair values of $232,000 and $130,860, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018. (If no entry is required for a transaction/event, select
"No journal entry required" in the first account field.)
In: Accounting
South Beach Apparel issued 11,000 shares of $4 par value stock for $20 per share. What is true about the journal entry to record the issuance?
Multiple Choice
Credit Common Stock $220,000
Debit Common Stock $44,000
Credit Additional Paid-In Capital $176,000
Credit Cash $220,000
A company issued 1,900 shares of $3 par value preferred stock for $4 per share. What is true about the journal entry to record the issuance?
Multiple Choice
Credit Additional Paid-In Capital $1,900
Debit Preferred Stock $7,600
Credit Cash $7,600
Credit Preferred Stock $7,600
On February 22, Brett Corporation acquired 200 shares of its $4 par value common stock for $23 each. On March 15, the company resold 64 shares for $27 each. What is true of the entry for reselling the shares?
Multiple Choice
Credit Treasury Stock $1,728
Credit Cash $1,472
Credit Additional Paid–in Capital $256
Debit Treasury Stock $1,472
In: Accounting
On January 1, 2005, Technocraft, Inc., acquired a patent that was used for manufacturing semiconductor-based electronic circuitry. The patent was originally recorded in Technocraft's ledger at its cost of $1,779,000. Technocraft has been amortizing the patent over an expected economic life of 10 years. Residual value was assumed to be zero. Technocraft sued another company for infringing on its patent. On January 1, 2012, Technocraft spent $180,000 on this suit and won a judgment to recover the $180,000 plus damages of $500,000. The sued company paid the $680,000. 1.Prepare the journal entry to record the award of $680,000 on January 1, 2012. 2. Indicate the entry you would have made had Technocraft lost the suit. (Assume that the patent would be valueless if Technocraft had lost the suit.) 3.What are the financial statement effects of capitalizing or expensing the cost of defending the patent? 4.Prepare the necessary journal entry on December 31, 2011. 5.Prepare the necessary journal entry on January 1, 2012, to record the expenditure of $180,000 to defend the patent.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $150 million of 4.0% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Tanner-UNF paid $120.0 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, 2021, was $130.0 million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2021 and interest
on December 31, 2021, at the effective (market) rate.
3. At what amount will Tanner-UNF report its
investment in the December 31, 2021, balance sheet?
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2022, for $100.0 million. Prepare the
journal entry to record the sale.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $190
million of 8.0% bonds, dated July 1, on July 1, 2021. Company
management has the positive intent and ability to hold the bonds
until maturity. The market interest rate (yield) was 10% for bonds
of similar risk and maturity. Tanner-UNF paid $160.0 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, 2021, was $170.0
million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2021 and interest
on December 31, 2021, at the effective (market) rate.
3. At what amount will Tanner-UNF report its
investment in the December 31, 2021, balance sheet?
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2022, for $140.0 million. Prepare the
journal entry to record the sale
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $290 million of 6.0% bonds, dated July 1, on July 1, 2018. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 7% for bonds of similar risk and maturity. Tanner-UNF paid $260.0 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, 2018, was $270.0 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate. 3. At what amount will Tanner-UNF report its investment in the December 31, 2018, balance sheet? 4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $250.0 million. Prepare the journal entry to record the sale.
In: Accounting
Exercise 12-6 (Algo) Trading securities [LO12-1, 12-3]
Mills Corporation acquired as an investment $300 million of 6%
bonds, dated July 1, on July 1, 2021. Company management is holding
the bonds in its trading portfolio. The market interest rate
(yield) was 4% for bonds of similar risk and maturity. Mills paid
$350 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,
2021, was $325 million.
Required:
1. & 2. Prepare the journal entry to record
Mills’ investment in the bonds on July 1, 2021 and interest on
December 31, 2021, at the effective (market) rate.
3. Prepare the journal entry by Mills to record
any fair value adjustment necessary for the year ended December 31,
2021.
4. Suppose Moody’s bond rating agency upgraded the
risk rating of the bonds, and Mills decided to sell the investment
on January 2, 2022, for $360 million. Prepare the journal entries
required on the date of sale.
In: Accounting
Tanner-UNF Corporation acquired as an investment $240 million of
8% bonds, dated July 1, on July 1, 2021. Company management is
holding the bonds in its trading portfolio. The market interest
rate (yield) was 10% 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, 2021, was $210 million.
Question:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2021 and interest
on December 31, 2021, at the effective (market) rate.
3. Prepare any additional journal entry necessary
for Tanner-UNF to report its investment in the December 31, 2021,
balance sheet.
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2022, for $180 million. Prepare the
journal entries required on the date of sale.
In: Accounting