Chapter 12 HW - Chapter 12 Investments Exercise 12-6...

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Chapter 12 Investments
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Exercise 12-6 Requirement 1 2009 March 2 ($ in millions) Investment in Platinum Gauges, Inc. shares . .............................. 31 Cash. ........................................................................................ 31 April 12 Investment in Zenith bonds . ........................................................ 20 Cash. ........................................................................................ 20 July 18 Cash. ............................................................................................ 2 Investment revenue. ................................................................. 2 October 15 Cash. ............................................................................................ 1 Investment revenue. ................................................................. 1 October 16 Cash. ............................................................................................ 21 Investment in Zenith bonds . .................................................... 20 Gain on sale of investments. .................................................... 1 November 1 Investment in LTD preferred shares . .......................................... 40 Cash. ........................................................................................ 40
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Exercise 12-6 (continued) December 31 Accumulated ($ in millions) Unrealized Available-for-Sale Securities Cost Fair Value Gain (Loss) Platinum Gauges, Inc. shares $31 $32* $1 LTD preferred shares 40 37 ** (3) Totals $71 $69 $(2) * $32 x 1 million shares ** $74 x 500,000 shares Adjusting entry: Net unrealized holding gains and losses OCI ($71 – 69) ............. 2 Fair value adjustment ($71 – 69) . .............................................. 2 2010 January 23 ($ in millions) Cash ([1 million shares x 1 / 2] x $32) ................................................ 16.0 Gain on sale of investments (difference) . .................................. 0.5 Investment in Platinum Gauges shares ($31 million cost x 1 / 2 ) ................................................... 15.5 March 1 Cash ($76 x 500,000 shares). ............................................................ 38 Loss on sale of investments (difference). ....................................... 2 Investment in LTD preferred (cost). ......................................... 40 Note: As part of the process of recording the normal, period-end fair value adjusting entry at 12/31/2010, Construction would debit Fair value adjustment and credit Net unrealized gains and losses—OCI for the $2 million associated with the sold investments to remove their effects from the financial statements.
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Exercise 12-6 (concluded) Requirement 2 2009 Income Statement ($ in millions) Investment revenue (from July 18; Oct. 15). .................................... $3 Gain on sale of investments (from Oct. 16). ................................... 1 Other comprehensive income:* Net unrealized holding gains and losses on investments**. . $2
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This note was uploaded on 05/08/2010 for the course ACCTG 322 taught by Professor Gill during the Spring '08 term at San Diego State.

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Chapter 12 HW - Chapter 12 Investments Exercise 12-6...

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