acct504 Chapter 8 Short Exercise Solutions

acct504 Chapter 8 Short Exercise Solutions - Chapter 8...

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Chapter 8 Long-Term Investments & the Time Value of Money Short Exercises (10-15 min.) S 8-1 Req. 1 Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 2012 Apr. 10 Available-for-Sale Investment (600 × $17) ........... 10,200 Cash .................................................................. 10,200 July 22 Cash (600 × $1.24) ................................................. 744 Dividend Revenue ........................................... 744 Dec. 31 Unrealized Loss on Investments ......................... 4,700 Allowance to Adjust Investment to Market ($10,200 $5,500) .......................... 4,700 Req. 2 The income statement will report dividend revenue of $744. The statement of other comprehensive income will report an unrealized loss on available-for-sale investments of $4,700. (continued) (10-15 min.) S 8-1 Req. 3 ASSETS Total current assets………………………………… ........ $ XXX Long-term available-for-sale investments, at market value…………………………………… ........ 5,500 STOCKHOLDERS’ EQUITY 1 Chapter 8 Long-Term Investments and International Operations
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Common stock…………………………………………….. $ XXX Retained earnings………………………………………… XXX Accumulated other comprehensive income: Unrealized (loss) on investments…………………… (4,700) (5-10 min.) S 8-2 Req. 1 Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 2013 May 21 Cash (600 × $23) .................................................... Allowance to Adjust Investment to Market ......... 13,800 4,700 Available-for-Sale Investment ........................ 10,200 Unrealized Loss on Investment……… 4,700 Gain on Sale of Investment ............................ 3,600 Req. 2 This gain on sale of investment is a realized gain. The loss recorded at December 31, 2012, was unrealized because it resulted from a change in the investment’s market value, not from the sale of the investment.
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