Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 16, Problem 16.7P
a.
To determine
To prepare: The
b.
To determine
To prepare: The journal
c.
To determine
To prepare: The journal entry to record the sale of D’s common shares.
d.
To determine
To prepare: The journal entry to record the acquisition of FOAH common stock.
e.
To determine
To prepare: The journal entry to adjust the portfolio to fair value at the end of Year 2.
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Fair Value Journal Entries, Trading Investments
Gruden Bancorp Inc. purchased a portfolio of trading securities during Year 1. The cost and fair value of this portfolio on December 31, Year 1, was as follows:
Name
Number of Shares
Total Cost
Total Fair Value
Griffin Inc.
1,100
$14,740
$13,860
Luck Company
850
27,880
25,930
Wilson Company
250
7,250
7,400
Total
$49,870
$47,190
On May 10, Year 2, Gruden Bancorp Inc. purchased 500 shares of Carroll Inc., at $29 per share plus a $80 brokerage commission.
Provide the journal entries to record the following:
a. The adjustment of the trading security portfolio to fair value on December 31, Year 1.
Year 1, Dec. 31
b. The May 10, Year 2, purchase of Carroll Inc. stock.
Year 2, May 10
io 1 TOYOTY Corporation acquired $5,500,000 par value, 12%, five-year bonds on their date of issue, January
1, 2019. The market rate at the time of issue was 8% and interest is paid semiannually on June 30 and December
31. Capitol will use the effective interest rate method to account for this investment. Capitol intends to hold the
investment until the bonds mature.
Table Present Value of $1
Periods
4%
6%
8%
12%
5
0.8219
0.7473
0.6806
0.5674
10
0.6756
0.5584
0.4632
0.3220
Table Present Value of an Ordinary Annuity
Periods
4%
6%
8%
12%
5
4.4518
4.2124
3.9927
3.6048
10
8.1109
7.3601
6.7101
5.6502
Instruction:
1. Determine the purchase price of the investment in bonds.
2. Prepare the journal entry to record the acquisition of the bond investment.
3. Prepare the journal entry to record the interest income at June 30, 2019.
4. Prepare the journal entry to record the sale of the bonds at December 31, 2021 for $5,960,000.
14. Open Skies purchased a portfolio of available-for-sale securities during the year. The
cost and fair value of the portfolio is as follows:
Name
Eden Rock
Blue Creek
First Stone
Total
Number of Shares
100
400
450
Total Cost
$3,000
$6,500
$5,400
$14,900
Total Fair Value
$4,800
$5,800
$6,750
$17,350
a. Make the journal entry to record the adjustment of available-for-sale security
portfolio to fair value on December 31;
b. Where will the information be reported on the financial statements?
Chapter 16 Solutions
Intermediate Accounting (2nd Edition)
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Notes Receivable. On January 1, 2018, Racine...Ch. 16 - Debt Investment, Held to Maturity, Impairments....Ch. 16 - Debt Investment, Impairments, IFRS. Repeat E16-19...Ch. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
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