Test 3 Practice Questions

Test 3 Practice Questions - BMGT311 Test 3 Practice...

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Unformatted text preview: BMGT311 Test 3 Practice Questions EXERCISE 17-6 (10–15 minutes) Securities Cost Fair Value 3,000 shares of Petty Corporation Common Stock 40,000 46,000 1,000 shares of Dowe Incorporated Pref. Stock 25,000 22,000 65,000 68,000 Adjusting Entry. Securities are classified as trading (a) Securities Fair Value Adjustment (Trading)................................................................................................. 3,000 Unrealized Holding Gain or Loss— Income.......................................................................................... 3,000 Adjusting entry, securities are classified as available-for-sale (b) Securities Fair Value Adjustment (Available-for-Sale)................................................................................ 3,000 Unrealized Holding Gain or Loss— Equity........................................................................................... 3,000 (c) The Unrealized Holding Gain or Loss—Income account is reported in the income statement under Other Revenues and Gains. The Unrealized Holding Gain or Loss—Equity account is reported as a part of other comprehensive income and as a component of stockholders’ equity until realized. The Securities Fair Value Adjustment account is added to the cost of the Available-for-Sale or Trading Securities account to arrive at fair value. EXERCISE 17-21 (15-20 minutes) Securities Cost Fair Value Investment in debt securities (hold-to-maturity) 40,000 41,000 Investment in Chen company stock 800,000 910,000 Bonds Payable 220,000 195,000 Fair Value Option, NI=$100,000 before reporting and securities gains or losses, determine Dawson’s Net Income (a) Net income before security gains and losses................................................. $100,000 Investment in debt securities ($41,000 – $40,000)........................................ 1,000 Investment in Chen Company stock ($910,000 – $800,000).................................................................................. 110,000 Bonds payable ($220,000 – $195,000)........................................................... 25,000 Net income...................................................................................................... $236,000 Journal entry for rerecording the fair value option for bonds payable (b) Bonds Payable................................................................................................ 25,000 Unrealized Holding Gain or Loss ($220,000 – $195,000)...................................................................... 25,000 EXERCISE 23-13 (30–40 minutes) (Direct Method) ANDREWS INC....
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This note was uploaded on 09/07/2011 for the course BMGT 311 taught by Professor Staff during the Spring '08 term at Maryland.

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Test 3 Practice Questions - BMGT311 Test 3 Practice...

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