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Unformatted text preview: In-Class Activity #7 (30 points + 10 extra credit points)List the two members of today’s activity__________________________________________________________________Loxley Company has the following portfolio of equity securities at September 30, 2007, its last reporting date.SecuritiesCostFair valueLeftorium Inc, (1,000 shares)120,000133,000Burns Inc. (1,000 shares)150,000156,000Krustyburger Inc. (1,000 shares)170,000172,000The following events also occurred:On Oct. 10, 2007, Loxley sold the Leftorium shares at a price of $110 per share. On Nov. 2, 2007, Loxley acquired 800 shares of Powell Motors common stock at $80.00 per share.On Dec. 31, 2007, the fair values of the shares owned were: Burns $140,000, Krustyburger $165,000, and Powell Motors $65,000.1. Assume the securities are classified as trading securities. State any journal entries necessary to recognize any realizedgains or losses between September 30thand December 31st.Cash110,000Loss10,000Investment (trading)120,0002. Assume the securities are classified as trading securities. State any journal entries necessary to recognize any unrealizedgains or losses between September 30thand December 31st. In your answer, also clearlyindicate if the unrealized gain or loss affects the income statement.Investment (cost)Sec. FV adjInvestment (Fair value)440,00021,000461,00035,000384,00014,000370,000Unrealized holding loss (Income)35,000Sec. FV Adj (Trading)35,0003. Now assume the 1,000 shares invested in Burns represent 40% of the shares outstanding. Also assume that between September and December, Burns reported net income of 20,000. In addition, Burns declared and paid a cash dividend to shareholders of 8,000. State any entries necessary related to the ownership of Burns stock.Investment (Burns)8,000Revenue from Investment 8,000=40%*20,000Cash3,200Investment (Burns)3,200=40%*8,0004. ABC Company reports pretax financial income of $100,000 for 2009. The following items cause taxable income to be different from pretax financial income.•Rent collected on the tax return is greater than rent earned on the income statement by $12,000.•Fines for pollution appears as an expense of $7,000 on the income statement.ABC’s tax rate is 30% for all years and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2009.Prepare the journal entry to record income tax expense, income taxes payable and deferred income taxes for 2009....
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- Fall '08
- Progressive Tax, Taxation in the United States, Generally Accepted Accounting Principles