EXAM 3 SOLUTION SPRING 04

EXAM 3 SOLUTION SPRING 04 - Management 1A Spring 2004 Danny...

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Management 1A Spring 2004 Danny S. Litt EXAM 3 SOLUTION Name: ________________ Student ID No. _________________ I agree to have my grade posted by Student ID Number. ___________________ (Signature) PROBLEM POINTS SCORE 1 20 2 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 10 20 TOTAL 200
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MANAGEMENT 1A NAME: __________________________ Problem 1 On January 5, 2002, Sloan Company purchased the following stock securities as a long-term investment: 400 shares Nance Corporation common stock for $4,200. 500 shares Wood Corporation common stock for $12,000. 800 shares Trent Corporation common stock for $19,800. Assume that Sloan Company cannot exercise significant influence over the activities of the investee companies and that the cost method is used to account for the investments. On June 30, 2002, Sloan Company received the following cash dividends: Nance Corporation. .............................................. $2.00 per share Wood Corporation . ............................................. $1.00 per share Trent Corporation . .............................................. $1.50 per share On November 15, 2002, Sloan Company sold 200 shares of Trent Corporation common stock for $5,500. On December 31, 2002, the fair value of the securities held by Sloan Company is as follows: Per Share Nance Corporation common stock $10 Wood Corporation common stock 18 Trent Corporation common stock 25 Requirements: Prepare the appropriate journal entries that Sloan Company should make on the following dates: January 5, 2002 Stock Investments . ................................................................ 34,000 Cash .................................................................................................... 34,000 (To record purchase of stock securities as a long-term investment) June 30, 2002 Cash ........................................................................ 2,500* Dividend Revenue . ................................................................................. 2,500 (To record cash dividends received) *400 × $2 = $800; 500 × $1 = $500; and 800 × $1.50 = $1,200. November 15, 2002 Cash ........................................................................... 5,500 Stock Investments 4,950 Gain on Sale of Stock Investments . ........................................................ 550 (To record sale of 200 shares of Trent Corporation common stock) December 31, 2002 Unrealized Loss—Equity . .................................................... 3,050 Market Adjustment—Available-for-Sale 3,050 (To value long-term investments at fair value) Investment Portfolio Security Shares Cost Fair Value Nance Corporation 400 $ 4,200 $ 4,000 Wood Corporation 500 12,000 9,000 Trent Corporation 600 14,850 15,000 Total $31,050 $28,000 Page 1
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MANAGEMENT 1A NAME: __________________________ Problem 2 Information pertaining to long-term investments in stock in 2002 by Tate Corporation follows: Acquired 10% of the 250,000 shares of common stock of Carlsen Company at a total cost of $8 per share
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EXAM 3 SOLUTION SPRING 04 - Management 1A Spring 2004 Danny...

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