121_05A - Question 1A 1. Record the following journal...

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Chapter 5 – Page 1 of 18 Question 1A 1. Record the following journal entries for 2011. Date Account names Debit Credit A 12/01/11 Investment in debt security 50,000 Cash 50,000 Bought $50,000 debt security, 6% interest, due 3 months B 12/31/11 Investment in debt security 250 Interest revenue 250 Accrued interest on debt security, I = 50,000x0.06x1/12 2. Prepare the short-term investments T-account as of 12/31/2011. Investment in debt security Purchase cost 50,000 Interest accrued 250 Book value 50,250 3. Prepare the related sections of the income statement and the balance sheet as of the end of the year 2011. Income Statement For the year ended December 31, 2011 Other income (expenses) Interest revenue $250 Balance Sheet December 31, 2011 Investment in debt security 50,250 4. Collected amount due on debt security in full on due date. C 03/01/12 Cash 50,750 Investment in debt security 50,250 Interest revenue (50,000x0.06x2/12) 500 Collected principal and interest on due date What did you learn?
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Chapter 5 – Page 2 of 18 Question 1 1. Record the following journal entries for 2011. Date Account names Debit Credit A 11/06/11 Short-Term Investment 67,000 Cash 67,000 Purchased 2,000 shares of Titan stock for $67,000 B 11/27/11 Cash (2,000 × $0.85) 1,700 Dividend Revenue 1,700 Received cash dividend of $0.85 per share of Titan C 12/31/11 Short-Term Investment (81 – 67) 14,000 Unrealized Gain on Investment 14,000 Adjusted Titan stock to $81,000 market value 2. Prepare the short-term investments T-account as of 12/31/2011. Short-term investments Purchase cost 67,000 Unrealized gain 14,000 Market value 81,000 3. Prepare the related sections of the income statement and the balance sheet as of the end of the year 2011. Income Statement For the year ended December 31, 2011 Dividend revenue $1,700 Unrealized gain on investments 14,000 Balance Sheet December 31, 2011 Short-term investments at market value 81,000
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Chapter 5 – Page 3 of 18 4. Record the following journal entries for 2012. Date Account names Debit Credit D 01/15/12 Cash 80,000 Loss on sale of investment 1,000 Short-Term Investment 81,000 Sold Titan stock for $80,000 5. Prepare the related sections of the income statement and the balance sheet as of the end of the year 2012. Income Statement For the year ended December 31, 2012 Loss on sale of investments (1,000) Balance Sheet December 31, 2012 Short-term investments at market value none Note: The gain or loss on sale is calculated using book value of the stock, not the original cost. What did you learn?
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Chapter 5 – Page 4 of 18 Question 2 1. Record the following journal entries for 2011. Date Account names Debit Credit A 12/05/11 Short-Term Investment 50,000 Cash 50,000 Purchased 1,000 shares of Juno stock for $50,000 B 12/31/11 Unrealized loss investment (48 – 50) 2,000 Short-Term Investment 2,000 Adjusted Juno stock to $48,000 market value 2. Prepare the short-term investments T-account as of 12/31/2011. Short-term investments
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This note was uploaded on 10/24/2010 for the course ACCOUNTING 31609 taught by Professor R.ambrose during the Fall '09 term at San Mateo Colleges.

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121_05A - Question 1A 1. Record the following journal...

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