ACCT 5010-INT II-HW-CH 17 - CHAPTER 17 EXERCISE 17-1(10-15...

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CHAPTER 17 EXERCISE 17-1 (10-15 minutes) a. 1 b. 2 c. 1 d. 2 e. 2 f. 3 EXERCISE 17-2 (15-20 minutes) (a) January 1, 2003 Held-to-Maturity Securities ................................................. 300,000 Cash ............................................................................ 300,000 (b) December 31, 2003 Cash ................................................................ 36,000 Interest Revenue ......................................................... 36,000 (c) December 31, 2004 Cash ................................................................ 36,000 Interest Revenue ......................................................... 36,000 EXERCISE 17-3 (15-20 minutes) (a) January 1, 2003 Held-to-Maturity Securities ................................................. 322,744.44 Cash ............................................................................ 322,744.44 (b) Schedule of Interest Revenue and Bond Premium Amortization Effective Interest Method 12% Bonds Sold to Yield 10% Date Cash Received Interest Revenue Premium Amortized Carrying Amount of Bonds 1/1/03 $322,744.44 12/31/03 $36,000 $32,274.44 $3,725.56 319,018.88 12/31/04 36,000 31,901.89 4,098.11 314,920.77 12/31/05 36,000 31,492.08 4,507.92 310,412.85 12/31/06 36,000 31,041.29 4,958.71 305,454.14 12/31/07 36,000 30,545.86 * 5,454.14* 300,000.00 *Rounded by 45¢. (c) December 31, 2003 17-1
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Cash ................................................................ 36,000 Held-to-Maturity Securities ....................................... 3,725.56 Interest Revenue ......................................................... 32,274.44 (d) December 31, 2004 Cash ................................................................ 36,000 Held-to-Maturity Securities ....................................... 4,098.11 Interest Revenue ......................................................... 31,901.89 EXERCISE 17-4 (10-15 minutes) (a) January 1, 2003 Available-for-Sale Securities ............................................... 322,744.44 Cash ............................................................................ 322,744.44 (b) December 31, 2003 Cash ......................................................................... 36,000 Available-for-Sale Securities ..................................... 3,725.56 Interest Revenue ......................................................... 32,744.44 Securities Fair Value Adjustment— Available-for-Sale ...................................................................... 1,481.12 Unrealized Holding Gain or Loss— Equity ($320,500.00 – $319,018.88) ............................... 1,481.12 (c) December 31, 2004 Unrealized Holding Gain or Loss—Equity .............................................. 7,401.89 Securities Fair Value Adjustment— Available-for-Sale ............................................................ 7,401.89 Cost Fair Value Unrealized Holding Gain (Loss) Available-for-sale bonds 314,920.77 309,000.00 $(5,920.77) Previous securities fair value adjustment— Dr. 1,481.12 Securities fair value adjustment—Cr. 17-2
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$(7,401.89 ) EXERCISE 17-5 (20-30 minutes) (a) Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method 9% Bond Purchased to Yield 12% Date Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds 1/1/03 $185,589 12/31/03 $18,000 $22,804 * $4,804* 190,393 12/31/04 18,000 22,804 4,804 195,197 12/31/05 18,000 22,803** 4,803 200,000 * *($200,000 – $185,589) ÷ 3 = $4,804 **Rounded by $1. (b) Schedule of Interest Revenue and Bond Discount Amortization Effective Interest Method 9% Bond Purchased to Yield 12% Date Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds 1/1/03 $185,589.00 12/31/03 $18,000 $22,270.68* $4,270.68 189,859.68 12/31/04 18,000 22,783.16 4,783.16 194,642.84 12/31/05 18,000 23,357.16** 5,357.16 200,000.00 * *$185,589 X .12 = $22,270.68 **Rounded by $.02. (c) December 31, 2004 Cash .......................................................................... 18,000.00 Held-to-Maturity Securities ....................................................... 4,804.00 Interest Revenue ............................................................... 22,804.00 (d) December 31, 2004 Cash .......................................................................... 18,000.00 Held-to-Maturity Securities ....................................................... 4,783.16 Interest Revenue ............................................................... 22,783.16 17-3
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EXERCISE 17-6 (10-15 minutes) (a) Securities Fair Value Adjustment— Trading ................................................................................... 5,000 Unrealized Holding Gain or Loss— Income .......................................................................... 5,000 (b) Securities Fair Value Adjustment— Available-for-Sale .................................................................. 5,000 Unrealized Holding Gain or Loss— Equity ........................................................................... 5,000 (c) The Unrealized Holding Gain or Loss—Income account is reported in the income statement under Other Revenues and Gains. The Unrealized Holding Gain or Loss—Equity account is reported as a part of other comprehensive income and as a component of stockholders’ equity until realized. The Securities Fair Value Adjustment account is added to the cost of the Available-for-Sale or Trading Securities account to arrive at fair value. EXERCISE 17-7 (10-15 minutes) (a) December 31, 2003 Unrealized Holding Gain or Loss—Income ............................................ 1,400 Securities Fair Value Adjustment (Trading) .................................. 1,400 (b) During 2004 Cash ............................................................................................... 9,400 Loss on Sale of Securities ........................................................................ 600 Trading Securities .......................................................................... 10,000 (c) December 31, 2004 Securities Cost Fair Value Unrealized Gain (Loss) Clemson Corp. stock $20,000 $19,100 ( $ (900) Buffaloes Co. stock 20,000 20,500 ( 500 )
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