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ORIE_350_Homework__9_Answers_revised

ORIE_350_Homework__9_Answers_revised - ORIE 350 Homework#9...

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ORIE 350 Homework #9 Due Thursday, April 5, 2007 by 4:30 PM Late homework is never accepted. Please staple your homework and write your section number on the homework. Graded problems 1. First Insurance purchased shares of Sun Microsystems on December 28, 1999 for $800,000. This investment was considered to be a short-term investment in trading securities. The value of the shares was $815,000 on Dec. 31, 1999. The shares were sold on January 3, 2000 for $780,000. a. Prepare the journal entry for Dec. 28, 1999. Dec. 28, 1999 Investment, TS 800,000 Cash 800,000 b. Prepare the journal entry for Dec. 31, 1999, First Insurance’s fiscal year end Dec. 31, 1999 Allowance, TS 15,000 Unrealized Gain, TS 15,000 The Unrealized Gain, TS is a temporary SE account, and will be closed out on Dec. 31, 1999 when the closing entries are prepared. c. Prepare the journal entry for Jan. 3, 2000. Jan. 3, 2000 Cash 780,000 Loss on Sale, TS 35,000 Allowance, TS 15,000 Investment, TS 800,000 2. During 2004, the following selected transactions occurred at the Hammertime Corporation. Feb. 1 Purchased 20,000 shares of the company’s stock on the open market for $22 cash per share, plus a $2,200 brokerage fee. July 15 Sold 10,000 of those shares for $24 per share, net of fees. Sept. 1 Sold 5,000 shares for $19.85 per share, net of fees. Dec. 15 Sold 5,000 shares for $18.15 per share, net of fees. a. Show all of the journal entries needed. Feb. 1, 2004 Treasury Stock 442,200 Cash 442,200
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July 15, 2004 Cash 240,000 Treasury Stock 221,100 Paid in Capital, Treasury Stock 18,900 Sept. 1, 2004 Cash 99,250 Paid in Capital, Treasury Stock 11,300 Treasury Stock 110,550 Sept. 1, 2004 Cash 90,750 Paid in Capital, Treasury Stock 7,600 Retained Earnings 12,200 Treasury Stock 110,550 b. What impact does the purchase of treasury stock have on dividends paid?
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