Herbst Enterprises purchased equity securities in Year 1 and classified them as available-for-sale. They reported an unrealized gain inYear 1 and an additional unrealized gain in Year 2. They decide to sell the securities in Year 3 for $28,000 more than the fair valuerecorded in Year 2. Based on this, Herbst needs toreport the realized gain as dividend revenue.O restate the Year 1 and Year 2 financial reports to change the unrealized gains to realized gains.report the realized gain under other comprehensive income.O make a reclassification adjustment for the securities they sold.

Herbst Enterprises does NOT need to report the realized gain as dividend revenue or restate the Year…

Answered: Herbst Enterprises purchased equity…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concord Corporation purchased 360 shares of Sherman Inc. common stock for $11,900 (Concord does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share. Prepare Concord' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Account Titles and Explanation Debit Credit (a) (b) (c)
Cheyenne Ltd. is a Canadian publicly-traded business with a December 31 fiscal year end. In order to get a better return on some of its excess cash, Cheyenne purchased 130 common shares of AFS Corporation on July 1, 2023 at a price of $3 per share. Due to the nature of the investment, Cheyenne's management is accounting for the equity investment using the fair-value through other comprehensive income (FV-OCI) without recycling to net income. On August 1, 2023, AFS declared dividends of $2/share, and paid those dividends on August 20, 2023. On December 31, 2023, shares in AFS were trading at $5 per share. On September 15, 2024, Cheyenne sold the shares in AFS for $6 per share. Prepare the journal entries required to record the above transactions on the books of Cheyenne Ltd. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List all debit…
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