AC301 A10

Brief Exercise 17-8

Cleveland Company has a stock portfolio valued at $7,490 (available-for-sale). Its cost was $6,960. If the Fair Value Adjustment account has a debit balance of $214, prepare the journal entry at year-end.  (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 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Exercise 17-13

Parent Co. invested $1,100,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays out 40% of net income in dividends each year. Use the information in the following T-account for the investment in Sub to answer the following questions.

Investment in Sub Co.
1,100,000
141,600
	56,640

(a) How much was Parent Co.’s share of Sub Co.’s net income for the year?

Net income

$

(b) How much was Parent Co.’s share of Sub Co.’s dividends for the year?

Dividends

$

(c) What was Sub Co.’s total net income for the year?

Total net income

$

(d) What was Sub Co.’s total dividends for the year?

Total Dividends

$

Problem 17-3

Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.

Feb. 1, 2014		Sharapova Company common stock, $111 par, 222 shares		$44,600
April 1		U.S. government bonds, 12%, due April 1, 2024, interest payable April 1 and October 1, 113 bonds of $1,000 par each		113,000
July 1		McGrath Company 12% bonds, par $54,200, dated March 1, 2014, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2034		58,536

(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.  (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 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2014, using the straight-line method.  (Round answers to 0 decimal places, e.g. 2,500. 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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2014

(c) The fair values of the investments on December 31, 2014, were:

Sharapova Company common stock		$33,180
U.S. government bonds		146,730
McGrath Company bonds		64,740

What entry, if any, would you recommend be made?  (Round answers to 0 decimal places, e.g. 2,500. 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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2014

(d) The U.S. government bonds were sold on July 1, 2015, for $121,190 plus accrued interest. Give the proper entry.  (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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Jul. 1, 2015
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