ACC 202 Intermediate Accounting II - ACC 202 Intermediate Accounting II Name You must show computations to receive credit for your answers 1 On Jan 1

ACC 202 Intermediate Accounting II - ACC 202 Intermediate...

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ACC 202 Intermediate Accounting II Name__________________________________ You must show computations to receive credit for your answers. 1. On Jan 1, 2011 XYZ Co purchased 12,000 shares of ABC Co for $15 a share. ABC has 100,000 shares outstanding. ABC reported net income of $60,000 and paid dividends of $5,000. On Dec 31, 2011 ABC had a market value of $18 a share. XYZ accounts for this investment as available for sale. Make the appropriate journal entries for 2011. A) Purchase Cost of purchasing shares =$15*12,000=$180,000 Journal entry Debit Credit Common stock $180,000 Cash $180,000 To record the purchase of 12,000 shares from ABC Company at $15 per share B) Receipt of dividends Debit Credit Dividend payable $5,000 Retained earnings $5,000 To record the issuance of dividends worth $5,000 C) Yearend adjustments Total cash at the yearend = 112,000*18=$2,016,000 Debit Credit Cash $2,016,000 Common stock $2,016,000 To record the adjustment of shares from 100,000 at the beginning of the year to 112,000 2. Use the same information as #1. On Dec 31, 2011 the value of ABC stock was $17.50 per share. Make the appropriate adjusting entry as of December 31, 2011. Total cash at the yearend = 112,000*17.5=$ Debit Credit Cash $1,960,000 Common stock $1,960,000 To record the adjustment of shares from 100,000 at the beginning of the year to 112,000
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3. On Jan 1, 2011 XYZ purchased 11,000 shares of ABC Co for $20 a share. ABC had 50,000 shares outstanding. XYZ now accounts for its investment in ABC using the equity method. ABC reported net income of $120,000 and paid dividends of 30,000. Make all of the necessary journal entries for 2011. a) Initial purchase Cost of purchasing the shares= 11,000*$20=$220,000 Debit Credit Common stock $220,000 Cash $220,000 To record the purchase of 11,000 shares from ABC Company at $20 per share b) Receipt of dividends Debit Credit Dividend payable $30,000 Retained earnings $30,000 To record the issuance of dividends worth $30,000 c) Reporting net income Debit Credit Dividend payable $120,000 Retained earnings $120,000 To record a net income of $120,000 earned by ABC Co 4. XYZ invested in the bonds of ABC Co. The bonds had a maturity of $70,000 due in 10 years, paying annual interest of 6%, semiannually on June 30 and Dec 31. The market rate was 8%. XYZ paid $60,487. Interest Received Interest Revenue Amortization Carrying Value $60,487 1 2100 2419.48 319.48 60806.48 2 2100 2432.26 332.26 61138.74 3 2100 2445.55 345.55 61484.29 4 2100 2459.37 359.37 61843.66 Fill in the above chart to account for the held to maturity investment and prepare journal entries for the amortization and receipt of interest: June 30, Year 1
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Debit Credit Interest expense $4,200 Loan account $651.74 Cash $4,851.74 To record loan repayment of $651.74 cash payment of $4,851.74 Dec 31, Year 2 Debit Credit Interest expense $4,200 Loan account $704.92 Cash $4,904.92 To record loan repayment of $704.92 cash payment of $4,904.92 5. The following information pertains to Crystal Inc.’s portfolio of investments for
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