accounting chapter 12

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peterq23
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252827
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accounting chapter 12
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2013-12-12 16:09:49
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accounting
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accounting
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  1. Kuhl Corporation acquires 50 Doan Inc. 8%, 10-year, $1000 bonds on 1.1.14 for $54,000, including brokerage fees of $1,000
    • Debt Investments $54,000
    •        Cash                           $54,000
  2. The Doan Inc. bonds pay interest of $2,000 semiannually for july 1st and jan 1st (50,000 x .08 x .5). The entry for the receipt of interest on July 1st is....
    • Cash $2,000
    •        Interest Revenue $2,000
  3. If Kuhl Corporations fiscal year ends on Dec 31, it accrues interest of $2,000 earned since July 1st. The adjusting entry is.....
    • Interest Receivable $2,000
    •      Interest Revenue              $2,000
  4. Kuhl reports interest receivable as a current asset in the balance sheet. It reports Interest Revenue under "other revenues and gains" in the income statement. Kuhl reports receipt of the interest on 1.1. as follows ... (2000)
    • Cash $2,000
    •      Interest Receivable $2,000
  5. Recording Sales of Bonds


    Kuhl corporation receives net proceeds of $58,000 on the sale of the Doan Inc. bonds on 1.1.15, after receiving the interest due. Since the securities cost $54,000, the company realizes a gain of $4,000. It records the sale as......
    • Cash $58,000
    •        gain on sale of debt investments $4,000
    •        Debt investments                     $54,000
  6. 1.purchased 30, $1,000 Hillary Co. 10% bonds for $30,000, plus brokerage fees of $900. Interest is payable semiannually on July 1st and Jan 1st.

    2. Received semiannual interest on Hillary Co. Bonds. on July 1st

    3. Sold 15 Hillary Co. bonds for $15,000 less $400 brokerage fees

    4. Prepare the adjusting entry for the accrual of interest on December 31st.
    • 1. Debt Investments $30,900
    •          Cash                        $30,900

    • 2. Cash  $1,500
    •           Interest Revenue $1,500
    •           ($30,000 x .5 x .1)

    • 3. Cash $14,600
    •    Loss on Sale of Debt Investments $850
    •                 Debt Investments              $15,450
    • 4. Interest Receivable $750
    •              Interest Revenue     $750
    •               (15000 x .1 x .5)
  7. Holdings of less than 20% - cost method
    July 1st, acquires 1000 shares (10%) ownership of Beal Corporation common stock. Sanchez pays $40 per share plus brokerage fees of $500. Whats the entry...
    • Stock Investments 40,500
    •         Cash                       40,500
  8. During the time Sanchez owns the stock, it makes entries for any cash dividends received. If Sanchez receives a $2 per share dividend on December 31. Whats the entry (1000 shares)
    • Cash $2000
    •        Dividend Revenue $2000
  9. Assume that Sanchez corporation receives net proceeds of $39,500 on the sale of its beal stock. Stock cost $40,500.
    • Cash                                      $39,500
    • loss on sale of stock investments $1,000
    •          Stock Investments                    $40,500
  10. Holdings between 20% and 50%
    Assume that Milar Corporation acquires 30% of the common stock of Beck Company for $120,000 on 1.1.14. Whats the entry
    • Stock invesments $120,000
    •         Cash                        $120,000
  11. Reports net income of $100,000. It declares and pays a $40,000 cash dividend. Milar records its share of becks income of $30,000 (30% x 100,000) and the reduction in the investment account for the dividends received, $12,000 ($40,000 x 30%) What are the entries
    • for Becks Income....
    • Stock Investments 30,000
    •         Revenue from Stock Investments

    • for Becks declared dividends
    • Cash 12,000
    •        stock investments 12,000
  12. Rho Jean Inc. acquired 5% of the 400,000 shares of common stock of stillwater corp. at a total cost of 6$ per share on May 18, 2014. On August 30, still water declared and paid a $75,000 dividend. On december 31, stillwater reported net income of 244,000 for the year.
    • May 18th...
    • Stock investments 120,000
    •         cash                         120,000

    • August 30th......
    • cash $3,750
    •       dividend revenue $3,750
  13. Debbie, Inc. obtained significant influence over North Sails by buying 40% of North Sails' 60,000 outstanding shares of common stock at a cost of $12 per share on Jan. 1st. On april 15th, north sails declared and paid a cash dividend of $45,000. On December 31st, North Sails reported net income of $120,000 for the year.
    • Jan 1st.
    • Stock Investments $288,000
    •        Cash                          $288,000

    • April 15th:
    • Cash 18,000
    •         Stock Investments 18,000

    • December 31st:
    • Stock Investments 48,000
    •      Revenue from Stock Investments  48,000
  14. Trading Securities 
    The cost of the trading securities of Hardy Company at December 31, 2014, is $50,850. At December 31, 2014, the fair value of the securities is $47,790
    • Unrealized loss-Income 3060
    •         Fair Value adjustment-trading 3060
  15. Trading Securities The cost of the trading securities of Hardy Company at December 31, 2014, is $90,000. At December 31, 2014, the fair value of the securities is $99,000.
    • Fair Value adjustment-trading 9,000
    •            Unrealized gain -- Income         9,000
  16. Trading Securities

    Cost
    ...........FV
    $50              $60
    $50              $45 
    • Cost...........FV
    • $50              $60 --- unrealized gain of $10
    • $50              $45 --- unrealized loss of $5
  17. Only for trading

    If FV > Cost

    • Only for tradingIf FV > Cost
    • IF FV > Cost 
    • Dr. Fair Value adjustment - trading 10
    •      Cr. unrealized gain - income              10
    • Dr. unrealized loss -- income 10
    •      Cr. Fair Value adjustment -- trading    10
  18. Non-trading securities

    FV < Cost

    FV > Cost
    • FV > Cost
    • Dr. Fair value adjustment - no trading
    •        Cr. Unrealized gains equity
    • FV < Cost
    • Dr. unrealized loss equity
    •        Cr. Fair value adj. - no trading
  19. Cost of trading securities is 62,000
    Fair value is 59,000

    TI*****
    • Unrealized loss--income $3,000
    •           Fair value adj. - trading $3,000
  20. non - trading stock securities is 72,000

    Fair value is 66,000
    • unrealized loss -- equity $6,000
    •      fair value adjustment -- non trading $6,000

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