Chapter 8: Accounting for Receivables

Exercise 1:
Interest Maturity Date
(a) $ 800 August 9
(b) $ 1,120 October 12
(c) $ 200 July 11

Exercise 2:
Maturity Date Annual Interest Rate Total Interest

(a) May 31 5% $ 5,000

(b) August 1 8% $ 600
(c) September 7 10% $ 6,000

Exercise 3:

Date Account Title Debit Credit

(a) Dec. 31 Bad Debt Expense 1,400
Accounts Receivable - Sandy 1,400

(b.1)Dec. 31 Bad Debt Expense 8,120

Allowance for Doubtful Accounts 8,120
[($840,000 – $28,000) x 1%]

(b.2)Dec. 31 Bad Debts Expense 8,900

Allowance for Doubtful Accounts 8,900
[($110,000 x 10%) – $2,100]

(c.1)Dec. 31 Bad Debt Expense 6,090

Allowance for Doubtful Accounts 6,090
[($840,000 – $28,000) x .75%]

(c.2)Dec. 31 Bad Debt Expense 6,800

Allowance for Doubtful Accounts 6,800
[($110,000 x 6%) + $200]
Exercise 4:

Date Account Title Debit Credit

(1) Allowance for Doubtful Accounts 14,100
Accounts Receivable 14,100

(2) Accounts Receivable 1,800

Allowance for Doubtful Accounts 1,800

Cash 1,800
Accounts Receivable 1,800

Dec. 31 (3) Bad Debt Expense 16,300

Allowance for Doubtful Accounts 16,300

Allowance for Doubtful Accounts

2019 2019
14,100 Jan. 1 15,000
1,800
14,100 16,800
Bal 2,700
Adj 16,300
cr balance before. Adjustment (Unadjusted balance)
Req. Bal. 19,000

Exercise 5:

Date Account Title Debit Credit

Dec. 31, 2018 Bad Debt Expense 7,200
Allowance for Doubtful Accounts 7,200
($360,000 x 2%)

May 11, 2019 Allowance for Doubtful Accounts 1,100

Accounts Receivable—B. Ventura 1,100

Jun 12, 2019 Accounts Receivable—B. Ventura 1,100

Allowance for Doubtful Accounts 1,100

Cash 1,100
Accounts Receivable – B. Ventura 1,100
Exercise 6:

(a)
Date Account Title Debit Credit
Nov. 1 Notes Receivable – Jeanne Harn 15,000
Cash 15,000

Dec. 11 Notes Receivable – Bobby Brown 6,750

Sales Revenue 6,750

16 Notes Receivable – Richard Yap 4,400

Accounts Receivable— Richard Yap 4,400

31 Interest Receivable 277

Interest Revenue* 277

*Calculation of interest revenue:

Jeanne Harns note: $15,000 x 9% x 2/12 = $225
Bobby Brown’s note: 6,750 x 8% x 20/360 = 30
Richard Yap’s note: 4,400 x 12% x 15/360 = 22
Total accrued interest $277

(b)
Date 2020 Account Title Debit Credit
Nov. 1 Cash 16,350
Notes Receivable 15,000
Interest Receivable 225
Interest Revenue* 1,125
*($15,000 x 9% x 10/12)
Exercise 7:

Date Account Title Debit Credit

2018
May 1 Notes Receivable – Dianne Co. 16,000
Accounts Receivable – Dianne Co. 16,000

July 1 Notes Receivable – Sam Davis 25,000

Cash 25,000

Dec 31 Interest Receivable 2,530

Interest Revenue 2,530

Accrual of interest on Notes Receivables:

Dianne Co. = 16,000 x .12 x 8/12 = 1,280
Sam Davis = 25,000 x .10 x 6/12 = 1,250
2,530

2019
April 1 Accounts Receivable – Sam Davis 26,875
Notes Receivable – Sam Davis 25,000
Interest Receivable 1,250
Interest Revenue (25,000*.10*3/12) 625

May 1 Cash 17,920

Notes Receivable – Dianne Co. 16,000
Interest Receivable 1,280
Interest Revenue 640
MV = 16,000 + (16,000 x 0.12 x 12/12)
= 16,000 + 1,920.. (2018 – Interest Rec………………1,280)
(2019 – Int. Rev.(16,000 x .12 x 4/12…
640)
= 17,920
Exercise 8:
Date Account Title Debit Credit
(a)May 2 Notes Receivable 7,600,000
Cash 7,600,000

(b)Nov. 2 Accounts Receivable – Portland Inc. 7,904,000

Notes Receivable 7,600,000
Interest Revenue 304,000
MV = 7,600,000 + (7,600,000 x .08 x 6/12)
= 7,600,000 + 304,000
= 7,904,000

(c)Nov. 2 Allowance for Doubtful Accounts 7,600,000

Note Receivable – Portland Inc. 7,600,000

Problem 1

(a)

Date Account Title Debit Credit

1. Accounts Receivable 3,325,000
Sales Revenue 3,325,000

2. Sales Returns and Allowances 52,000

Accounts Receivable 52,000

3. Cash 2,824,000
Accounts Receivable 2,824,000

4. Allowance for Doubtful Accounts 80,000

Accounts Receivable 80,000

5. Accounts Receivable 30,000

Allowance for Doubtful Accounts 30,000

Cash 30,000
Accounts Receivable 30,000
 (b)

Accounts Receivable Allowance for Doubtful Accounts

Bal. 975,000 (2) 52,000 (4) 80,000 Bal. 80,000
(1) 3,325,000 (3) 2,824,000 (5) 30,000
(5) 30,000 (4) 80,000
(5) 30,000
Bal. 1,344,000 Bal. 30,000

(c)
Date Account Title Debit Credit
Dec. 31 Bad Debts Expense 97,000
Allowance for Doubtful Accounts 97,000

PROBLEM 2
(a)
Date14 Account Title Debit Credit
Dec. 31 Bad Debts Expense ($41,730 – 9,000) 32,730
Allowance for Doubtful Accounts 32,730

(a) & (b)

Bad Debt Expense Allowance for Doubtful Accounts

2018 2018
Dec. 31 32,730 Bal. 9,000
Dec 31 32,730
2019
Mar 31 1,500 May 31 1,500
Bal. 32,730 Bal. 41,730

(b)
Date5 Account Title Debit Credit
(1) Mar. 31 Allowance for Doubtful Accounts 1,500
Accounts Receivable 1,500

(2)May 31 Accounts Receivable 1,500

Allowance for Doubtful Accounts 1,500

31 Cash 1,500
Accounts Receivable 1,500
 (c)
Date Account Title Debit Credit
Dec. 31 Bad Debts Expense ($31,000 + $800) 31,800
Allowance for Doubtful Accounts 31,800

PROBLEM 3

(a) Total estimated bad debts = HK$7,370

Date Account Title Debit Credit

(b) Bad Debts Expense 10,370
Allowance for Doubtful Accounts (7,370 + 3,000) 10,370

(c) Allowance for Doubtful Accounts 5,000

Accounts Receivable 5,000

(d) Accounts Receivable 5,000

Allowance for Doubtful Accounts 5,000

Cash 5,000
Accounts Receivable 5,000

PROBLEM 4

(a)
Date Account Title Debit Credit
(1)Dec. 31 Bad Debts Expense 10,950
Allowance for Doubtful Accounts (11,750 – 800) 10,950

(2)Dec. 31 Bad Debts Expense 9,180

Allowance for Doubtful Accounts (918,000 x 1%) 9,180

(b)
Date Account Title Debit Credit
(1)Dec. 31 Bad Debts Expense 12,550
Allowance for Doubtful Accounts (11,750 + 800) 12,550

(2)Dec. 31 Bad Debts Expense 9,180

Allowance for Doubtful Accounts (918,000 x 1%) 9,180
(c)
Date Account Title Debit Credit
2019
Jan 31 Allowance for Doubtful Accounts 3,000
Accounts Receivable 3,000

(d)
Date Account Title Debit Credit
2019
Jan 31 Bad Debts Expense 3,000
Accounts Receivable 3,000
PROBLEM 5

Date Account Title Debit Credit

Jan. 5 Accounts Receivable –Thomas Co. 25,000
Sales Revenue 25,000

20 Notes Receivable – Thomas Co. 25,000

Accounts Receivable— Thomas Co. 25,000

Feb. 18 Notes Receivable – Joaquin Co. 9,000

Sales Revenue 9,000

Apr. 20 Cash ($25,000 + $562.50) 25,562.50

Notes Receivable - Thomas Co. 25,000
Interest Revenue ($25,000 X 9% X 3/12) 562.50

30 Cash ($30,000 + $1,200) 31,200

Notes Receivable – Rachel Co. 30,000
Interest Revenue ($30,000 X 12% X 4/12) 1,200

May 25 Notes Receivable – Ricardo Inc. 4,000

Accounts Receivable – Ricardo Inc. 4,000

Aug. 18 Cash ($9,000 + $360) 9,360

Notes Receivable – Joaquin Co. 9,000
Interest Revenue ($9,000 X 8% X 6/12) 360

25 Accounts Receivable - Ricardo Inc.($4,000 + $70) 4,070

Notes Receivable –Ricardo Inc. 4,000
Interest Revenue ($4,000 X 7% X 3/12) 70

Sept. 1 Notes Receivable – Flora Co. 12,000

Sales Revenue 12,000
PROBLEM 6

A.
Date Account Title Debit Credit
Jan. 1 Notes Receivable - Aby 6,000
Accounts Receivable - Aby 6,000

15 Cash (9,000 +90) 9,090

Notes Receivable 9,000
Interest Receivable (9,000 x .12 x 15/360) 45
Interest Revenue (9,000 x .12 x 15/360) 45

Jan. 18 Allowance for Doubtful Accounts 5,000

Accounts Receivable – Mr. Nat 5,000

24 Accounts Receivable – Mr. Nat 2,000

Allowance for Doubtful Accounts 2,000

Cash 2,000
Accounts Receivable – Mr. Nat 2,000

31 Allowance for Doubtful Account 6,000

Notes Receivable - Aby 6,000

B.
Date Account Title Debit Credit
1)Dec. 31 Bad Debts Expense [(580,000 – 20,000) x 1%] 5,600
Allowance for Doubtful Accounts 5,600

2) Bad Debts Expense (150,000 x 5% = 7,500 + 500) 8,000

Allowance for Doubtful Accounts 8,000

3) Bad Debts Expense 7,000

Accounts Receivable – Mr. Thomson 7,000
 PROBLEM 7

Date Account Title Debit Credit

Jan. 1 Allowance for Doubtful Accounts 2,000
Accounts Receivable - Goodrich 2,000

5 Accounts Receivable – Soo Company 58,000

Sales Revenue 58,000

6 Sales Returns and Allowances 5,000

Accounts Receivable – Soo Company 5,000

Feb. 2 Notes Receivable - Newnew 700

Accounts Receivable - Newnew 700

May 1 Notes Receivable – Blue Co 20,000

Sales Revenue 20,000

July 1 Cash (20,000+400) 20,400

Notes Receivable – Blue Co 20,000
Interest Revenue(20,000 x 0.12 x 2/12) 400

Sept. 30 Accounts Receivable – Mr. Qui 1,300

Allowance for Doubtful Accounts 1,300
Cash 1,300
Accounts receivable 1,300

Dec. 31 Allowance for Doubtful Accounts 700

Notes Receivable – Newnew Co 700

Dec. 31 Bad Debts Expense 11,630

Allowance for Doubtful Accounts 11,630

Accounts Receivable Allowance for Doubtful Accounts

Jan. 1 70,000 Jan. 1 2,000 Jan. 1 2,000 Jan. 1 1,800
Jan. 5 58,000 Jan. 6 5,000 Dec. 31 700 Sept. 30 1,300
Sept 30 1,300 Feb. 2 700
Sept 30 1,300
Bal 120,300 Unadjusted Bal. 400
Adjustment 11,630
Required bal 12,030
PROBLEM 8

a)

Date Account Titles Debit Credit

2018
July 2 Accounts receivable- Black Co 25,000
Sales revenue 25,000

7 Accounts receivable- Central Co 56,000

Sales revenue 56,000

8 Cash 441,000
Sales discount (2%*450,000) 9,000
Accounts receivable 450,000

13 Cash (28,000+560) 28,560

Notes receivable-Oregano 28,000
Interest receivable (28,000*12%*47/360) 439
Interest revenue (28,000*12%*13/360) 121

17 Cash 45,000
Accounts receivable- Black Co 45,000

20 Accounts receivable 5,000

Allowance for doubtful account 5,000

Cash 5,000
Accounts receivable 5,000

20 Accounts receivable- Dragon Co 120,000

Sales revenue 120,000

22 Notes receivable- Central Co 56,000

Accounts receivable- Central Co 56,000

24 Accounts receivable- Mango Co(19,000+317) 19,317

Notes receivable- Mango co 19,000
Interest receivable (19,000*10%*36/360) 190
Interest revenue (19,000*10%*24/360) 127

31 Cash 50,000
Accounts receivable –Dragon co 50,000

31 Allowance for doubtful account 12,500

Accounts receivable- Anna Co 12,500

31 Interest receivable (56,000*9%*9/360) 126

Interest revenue 126
 (b)

Accounts Receivable Allowance for Doubtful Accounts

July 1 15,100
July 1, 585,000 July 8 450,000 July 31 12,500 20 5,000
2, 25,000 July17 45,000 Unadjusted bal 7,600
7, 56,000 20 5,000 Adjustment 11,582
20, 5,000 22 56,000 Required bal 19,182
20, 120,000 31 50,000
24, 19,317 31 12,500
810,317 618,500
Balance, 191,817

(c)

General Journal

Date Account Titles Debit Credit

July 31, Bad debt expense 11,582
Allowance for doubtful accounts 11,582
 Chapter 9: Plant Assets, Natural Resources, and Intangible Assets
Exercise: 1

(a)

Cash Price = 420,000

Sales Taxes = 13,200
Painting and Lettering = 5,000
Total cost = $438,200

(b)

Date Account Title Debit Credit

Jan. 1 Delivery Truck 438,200
Cash 438,200

Exercise: 2

(a)

Cash Price = 1,500,000

Demolition Cost = 15,000
Salvage was sold = (2,000)
Attorney’s fees = 15,000
Real estate commission = 82,000
Total Cost = 1,610,000

(b)

Date Account Title Debit Credit

July 1 Land 1,610,000
Cash 1,610,000

July 30 Land Improvements 20,000

Cash 20,000

Exercise: 3

(a) $93,800
(b) Bulding = 7,800
Land Improvement = 12,700

Exercise: 4

Cash Price $30,000

Sales taxes 1,800
Painting and Lettering 400
Total Cost $32,200
Exercise: 5

$665,000

Exercise: 6

Date Account Title Debit Credit

Dec31 Accumulated Depreciation 50,000
Loss on Disposal of Plant Assets 10,000
Machine 60,000

Exercise: 7

Date Account Title Debit Credit

2018
Feb 1 Coal Mine 70,000,000
Cash 70,000,000

(b) Depletion expense 6,210,000

Accumulated depletion 6,210,000

Exercise:8

Cash price………………………………………….. $ 24,000

Sales tax……………………………………………… 1,200
Insurance during transit……………………………………. 200
Installation and testing…………………………………….. 400
Total cost……………………………………………………. $ 25,800

Entry: Debit Credit

Equipment 25,800
Cash 25,800

Exercise: 9

Date Account Title Debit Credit

(a) Accumulated depreciation 75,000
Delivery Equipment 75,000

(b) Accumulated depreciation 70,000

Loss on Disposal on Plant Asset 5,000
Delivery Equipment 75,000
Exercise: 10

Date Account Title Debit Credit

(a) Depreciation expense 4,800
Accumulated depreciation 4,800

(b) Cash 20,000

Accumulated depreciation (42,000+4,800) 46,800
Loss on disposal on Plant Asset 5,200
Equipment 72,000

Exercise: 11

Date Account Title Debit Credit

Jan. 1, 2019 (New) Office Equipment (19,000+5,000) 24,000
Accumulated depreciation 28,000
Loss on Disposal of Plant Assets 14,000
(Old) Office equipment 61,000
Cash 5,000

Exercise: 12

Date Account Title Debit Credit

Dec. 31, 2019 Depletion expense 1,200,000
Accumulated depletion 1,200,000

Exercise: 13

Date Account Title Debit Credit

Dec. 1, 2019 (New) Equipment (44,000+36,000) 80,000
Accumulated depreciation 54,000
Gain on Disposal of Plant Assets 8,000
(Old) Equipment 90,000
Cash 36,000
Problem 1

Item Land Building Other Accounts

1 6,000
2 780,000
3 5,000
4 145,000
5 35,000
6 10,000
7 2,000
8 14,000 (Land Improvement)
9 15,000
10 (3,600)
$169,400 $825,000 14,000

Problem 2

Date Account Title Debit Credit

1) Land 124,500
Cash (120,000 + 6,000 - 1,500) 124,500

2) Taxes expense 2,000

Cash 2,000

3) Truck 91,500
Cash 91,500

4) Prepaid insurance 2,000

Cash 2,000

5) Land improvement 22,000

Cash 22,000

6) Taxes expenses 500

Cash 500

7) Building 800
Cash 800
Problem 3
Date Account Title Debit Credit
Jan 1 Accumulated depreciation 58,000
Loss on disposal of Plant Asset 2,000
Machinery 60,000

June 30 Depreciation expense 2,304

Accumulated depreciation 2,304

Cash 18,000
Accumulated depreciation (28,480+2,304) 30,784
Gain on disposal on Plant Assets 8,784
Computer 40,000

Dec 31 Depreciation expense 2,250

Accumulated depreciation 2,250

(New) Delivery Truck (50,000+2,000) 52,000

Accumulated Depreciation 27,500
Gain on disposal on Plant Assets 44,500
(Old) Delivery Truck 33,000
Cash 2,000

Problem 4

Date Account Title Debit Credit

Jan. 2 Patent 560,000
Cash 560,000

Apr. 1 Goodwill 360,000

Cash 360,000

Jul. 1 Franchise 440,000

Cash 440,000

Sept. 1 Research expense 223,000

Cash 223,000

Nov. 1 Development expense 225,000

Cash 225,000

Dec. 31 Amortization expense 92,000

Patent (560,000/8) 70,000
Franchise [(440,000/10) x 6/12] 22,000
Problem 5

Date Account Title Debit Credit

a) Patent (700,000+20,000) 720,000
Cash 720,000

b) Amortization expense (720,000/8) 90,000

Patent 90,000

Problem 6

Date Account Title Debit Credit

1) Depletion expense 240,000
Accumulated depletion 240,000

2) Patent 140,000
Cash 140,000

Problem 7

Debit Credit
Sept. 30 Depreciation expense (1,000 x 9/12) 750
Accumulated depreciation - Equipment 750

Cash 7,300
Accumulated depreciation - Equipment 4,750
Gain on disposal of plant asset 2,050
Equipment 10,000

Problem 8

Debit Credit
Oct. 31 Depreciation expense (9,000-6,408) x 2/5 x 10/12) 864
Accumulated depreciation 864

(New) Delivery truck (15,000 + 10,000) 25,000

Accumulated depreciation (6,408+864) 7,272
Gain on disposal of plant asset 13,272
(Old) Delivery truck 9,000
Cash 10,000
Problem 9

Date Account Title Debit Credit

Jan 1 Accumulated depreciation 90,000
Machine 90,000

Apr 30 Depreciation expense 6,000

Accumulated depreciation 6,000

30 Cash 31,000
Accumulated depreciation (54,000+6,000) 60,000
Gain on disposal of Plant Assets 1,000
Equipment 90,000

Dec31 Depreciation expense 8,000

Accumulated depreciation 8,000

Accumulated depreciation 38,000

Loss on disposal on Plant Assets 4,000
Automobile 42,000
 Chapter 11: Liabilities
Exercise 1:

Date Account Titles Ref. Debit Credit

a) Jan 1, 2020 Cash (4,000*$1,000) 4,000,000
Bonds Payable 4,000,000
b) July 1,2020 Interest Expense (4,000,000*6%*1/2) 120,000
Cash 120,000
c) Dec 31,2020 Interest Expense (4,000,000*6%*1/2) 120,000
Interest Payable 120,000
Jan1, 2020 Interest Payable 120,000
Cash 120,000

Exercise 2:

Date Account Titles Ref. Debit Credit

(a) Jan 1, 2020 Cash (1,000,000 x 0.97) 970,000
Bonds Payable 970,000

(b) Jan 1, 2020 Cash (1,000,000 x 1.04) 1,040,000

Bonds Payable 1,040,000

Exercise 3:

Date Account Titles Ref. Debit Credit

a) Jan 1 Cash 200,000
Bonds Payable 200,000
b) July 1 Interest Expense (200,000*8%*1/2) 8,000
Cash 8,000
c) Dec 31 Interest Expense 8,000
Interest Payable 8,000
Jan 1 Interest Payable 8,000
Cash 8,000

Exercise 4:

Date Account Titles Ref. Debit Credit

(a) Jan 1, 2020 Cash (3,000,000 x 0.96) 2,880,000
Bonds Payable 2,880,000
(b) July 1 Interest Expense 141,000
Bonds Payable (120,000 ÷ 20) 6,000
Cash (3,000,000 x 9% x 1/2) 135,000
(c) Dec 31 Interest Expense 141,000
Bonds Payable (120,000 ÷ 20) 6,000
Interest Payable (3,000,000 x 9% x 1/2) 135,000
Jan 1 Interest Payable 135,000
Cash 135,000
 Exercise 5:

Date Account Titles Ref. Debit Credit

(a) Jan 1, 2020 Cash (2,000,000 x 1.02) 2,040,000
Bonds Payable 2,040,000
(b) July 1 Interest Expense 96,000
Bonds Payable (40,000 ÷ 10) 4,000
Cash (2,000,000 x 10% x 1/2) 100,000
(c) Dec 31 Interest Expense 96,000
Bonds Payable (40,000 ÷ 10) 4,000
Interest Payable (2,000,000 x 10% x 1/2) 100,000

Exercise 6:

Date Account Titles Ref. Debit Credit

(a) Jan 1, 2019 Interest Payable 56,000
Cash 56,000
(b) Jan 1 Bonds Payable 600,000
Loss on Bond Redemption 24,000
Cash (600,000 x 1.04) 624,000
(c) July 1 Interest Expense (1,000,000 x 7% x 1/2) 35,000
Cash 35,000

Exercise 7:

Date Account Titles Ref. Debit Credit

1. June 30, 2019 Bonds Payable 117,500
Loss on Redemption (132,600 – 117,500) 15,100
Cash (130,000 x 1.02) 132,600

2. June 30, 2019 Bonds Payable 151,000

Gain on Redemption (151,000 – 145,500) 5,500
Cash (150,000 x 0.97) 145,500
 Problem 1:

Date Account Titles Ref. Debit Credit

1. Jan 1 Cash 721,000
Bonds Payable ($700,000 x 1.03) 721,000

2. July 1 Interest Expense 30,975

Bonds Payable ($21,000 x 1/40) 525
Cash ($700,000 x 9% x 1/2) 31,500

3. Dec 31 Interest Expense 30,975

Bonds Payable ($21,000 x 1/40) 525
Bond Interest Payable ($700,000 x 9% x 1/2) 31,500

4. Jan 1 Bonds Payable 700,000

Cash 700,000

Problem 2:

Date Account Titles Ref. Debit Credit

1. Dec 31, 2019 Cash 575,000
Bonds Payable 575,000

2. June 30, 2020 Interest Expense 22,250

Bonds Payable ($25,000 ÷ 20) 1,250
Cash ($600,000 x 7% x 6/12) 21,000

3. Dec 31, 2020 Interest Expense 22,250

Bonds Payable ($25,000 ÷ 20) 1,250
Cash ($600,000 x 7% x 6/12) 21,000

4. Dec 31, 2029 Bonds Payable 600,000

Cash 600,000
 Problem 3:

Date Account Titles Ref. Debit Credit

a) Jan 1 Cash 420,000
Bonds Payable ($400,000 x 1.05) 420,000

b) July 1 Interest Expense 17,000

Bonds Payable ($20,000/20) 1,000
Cash ($400,000 x 9% x 1/2) 18,000

c) Dec 31 Interest Expense 17,000

Bonds Payable 1,000
Interest Payable 18,000

d) Non-current Liabilities
Bonds Payable $418,000

Current Liabilities
Interest Payable 18,000

Date Account Titles Ref. Debit Credit

e) Jan 1, 2019 Bonds Payable 416,000
Loss on redemption 4,000
Cash ($400,000 x 1.05) 420,000

Problem 4:

Date Account Titles Ref. Debit Credit

a) July 1, 2019 Cash 3,090,000
Bonds Payable ($3,000,000 x 1.03) 3,090,000
Dec 31, 2019 Interest Expense 115,500
Bonds Payable ($90,000 ÷ 20) 4,500
Interest Payable ($3,000,000 x 8% x 1/2) 120,000

b) July 1, 2019 Cash 2,880,000

Bonds Payable ($3,000,000 x 0.96) 2,880,000
Dec 31, 2019 Interest Expense 126,000
Bonds Payable ($120,000 ÷ 20) 6,000
Interest Payable ($3,000,000 x 8% x 1/2) 120,000

C) Premium
Non-current Liabilities
Bonds Payable, due 2029……………………………………………. $ 3,085,500

Discount
Non-current Liabilities
Bonds Payable, due 2029……………………………………………. $ 2,886,000
 Problem 5:

Date Account Titles Ref. Debit Credit

a) Jan 1 Cash 4,850,000
Bonds Payable ($5,000,000 x .97) 4,850,000

b)

Discount Amortization
Semi-annual Interest to be paid Interest exp to Bond Carrying
$5,000,000 − 4,850,000
int period ($5,000,000 x 8% x 1/2) be recorded Value
40
Issue Date $ 4,850,000
1 200,000 203,750 3,750 4,853,750
2 200,000 203,750 3,750 4,857,500
3 200,000 203,750 3,750 4,861,250
4 200,000 203,750 3,750 4,865,000

Date Account Titles Ref. Debit Credit

c) July 1, 2019 Interest Expense 203,750
Bonds Payable 3,750
Cash 200,000

Dec 31,2019 Interest Expense 203,750

Bonds Payable 3,750
Interest Payable 200,000

Jan 1, 2020 Interest Payable 200,000

Cash 200,000

July 1, 2020 Interest Expense 203,750

Bonds Payable 3,750
Cash 200,000
Dec 31, 2020 Interest Expense 203,750
Bonds Payable 3,750
Interest Payable 200,000

d)
Current Liabilities
Interest Payable 200,000

Non-current Liabilties
Bonds Payable 4,865,000
 Problem 6:

Date Account Titles Ref. Debit Credit

a) Jan 1 Cash 2,080,000
Bonds Payable ($ 2,000,000 x 1.04) 2,080,000

b)

Premium Amortization
Semi-annual Interest to be paid Interest exp to Bond Carrying
$2,080,000 − 2,000,000
int period ($2,000,000 x 9% x 1/2) be recorded Value
20
Issue Date $ 2,080,000
1 90,000 86,000 4,000 2,076,000
2 90,000 86,000 4,000 2,072,000
3 90,000 86,000 4,000 2,068,000
4 90,000 86,000 4,000 2,064,000

Date Account Titles Ref. Debit Credit

c) July 1, 2019 Interest Expense 86,000
Bonds Payable 4,000
Cash 90,000

Dec 31, 2019 Interest Expense 86,000

Bonds Payable 4,000
Interest Payable 90,000

Jan 1, 2020 Interest Payable 90,000

Cash 90,000

July 1, 2020 Interest Expense 86,000

Bonds Payable 4,000
Cash 90,000

Dec 31, 2020 Interest Expense 86,000

Bonds Payable 4,000
Interest Payable 90,000

d)
Current Liabilities
Interest Payable 90,000

Non-current Liabilities
Bonds Payable 2,064,000
 Problem7:
Date Account Titles Ref. Debit Credit
a) Jan 1, 2019 Cash 388,000
Bonds Payable 388,000

b)
Discount Amortization
Semi-annual Interest to be paid Interest exp to Bond Carrying
$400,000 − 388,000
int period ($400,000 x 8% x 1/2) be recorded Value
12
Issue Date $ 388,000
1 16,000 17,000 1,000 389,000
2 16,000 17,000 1,000 390,000
3 16,000 17,000 1,000 391,000
4 16,000 17,000 1,000 392,000

2.
Premium Amortization
Semi-annual Interest to be paid Interest exp to Bond Carrying
$306,000 − 300,000
int period ($300,000 x 10% x 1/2) be recorded Value
16
Issue Date $ 306,000
1 15,000 14,625 375 305,625
2 15,000 14,625 375 305,250
3 15,000 14,625 375 304,875
4 15,000 14,625 375 304,500

Date Account Titles Ref. Debit Credit

2. July 1, 2019 Cash 306,000
Bonds Payable ($ 300,000 x 1.02) 306,000

Dec 31, 2019 Interest Expense 14,625

$ 306,000−300,000
Bonds Payable 375
16
Interest Payable ($300,000 x 0.1 x 1/2) 15,000

Jan 1, 2020 Interest Payable 15,000

Cash 15,000

July 1, 2020 Interest Expense 14,625

Bonds Payable 375
Cash 15,000

July 1, 2020 Bonds Payable ($305,250 x 50%) 152,625

Loss on Redemption 3,375
Cash ($150,000 x 1.04) 156,000

Dec 31, 2020 Interest Expense 7,312.5

Bonds Payable (375 ÷ 2) 187.5
Interest Payable ($150,000 x 0.1 x 1/2) 7,500
 Problem 8:

a)

Date Account Titles Ref. Debit Credit

Jan 1, 2019 Cash 682,000
Bonds Payable 682,000

July 1, 2019 Interest Expense 34,500

$ 700,000−682,000
Bonds Payable 3,000
6
Cash ($700,000 x 9% x 1/2) 31,500

Dec 31, 2019 Interest Expense 34,500

Bonds Payable 3,000
Interest Payable 31,500

Jan 1, 2020 Interest Payable 31,500

Cash 31,500

b)

Discount Amortization
Semi-annual Interest to be paid Interest exp to Bond Carrying
$700,000 − 682,000
int period ($700,000 x 9% x 1/2) be recorded Value
6
Issue Date $ 682,000
1 31,500 34,500 3,000 685,000
2 31,500 34,500 3,000 688,000
3 31,500 34,500 3,000 691,000
4 31,500 34,500 3,000 694,000
c)

Current Liabilities
Interest Payable 31,500

Non-current Liabilities
Bonds Payable 694,000

Date Account Titles Ref. Debit Credit

d) Jan 1, 2022 Bonds Payable 700,000
Interest Payable 31,500
Cash 731,500

e) Jan 1, 2021 Bonds Payable 694,000

Loss on Redemption 41,000
Cash ($700,000 x 1.05) 735,000
 Chapter 12: Corporations
EX.1:

Date Account Title Debit Credit

a) Cash 96,000
Share Capital – Ordinary (2,000 x $10) 20,000
Share Premium – Ordinary 76,000

b) Cash 110,000
Share Capital – Ordinary (2,000 x $15) 30,000
Share Premium – Ordinary 80,000

c) Cash 96,000
Share Capital – Ordinary 96,000

d) Organization Expense 90,000

Share Capital – Ordinary (2,000 x $10) 20,000
Share Premium – Ordinary 70,000

e) Building 120,000
Share Capital – Ordinary (2,000 x $10) 20,000
Share Premium - Ordinary 100,000

EX.2:

Date Account Title Debit Credit

Feb 2 Organization Expense 38,000
Share Capital – Ordinary (5,000 x $1) 5,000
Share Premium – Ordinary 33,000

May 5 Cash 475,000

Share Capital – Ordinary (60,000 x $1) 60,000
Share Premium – Ordinary 415,000

June 6 Cash 110,000

Share Capital – Preference (1,000 x $100) 100,000
Share Premium – Preference 10,000

Nov7 Treasury Shares 18,000

Cash 18,000
EX.3:

Date Account Title Debit Credit

Apr 1 Cash (25,000 x $17) 425,000
Share Capital – Ordinary (25,000 x $4) 100,000
Share Premium – Ordinary 325,000

June 15 Cash Dividends 123,000

Dividends Payable (123,000 x $1) 123,000

July 10 Dividends Payable 123,000

Cash 123,000

Dec 1 Cash (2000 x $19) 38,000

Share Capital – Ordinary (2000 x $4) 8,000
Share Premium – Ordinary 30,000

Dec 15 Cash Dividends 150,000

Dividends Payable 150,000
[(98,000 + 25,000 + 2,000) x $1.20]

EX.4:

Date Account Title Debit Credit

Mar 10 Land 280,000
Share Capital – Ordinary (10,000 x $20) 200,000
Share Premium – Ordinary 80,000

Aug 20 Land 440,000

Share Capital – Ordinary (20,000 x $20) 400,000
Share Premium – Ordinary (20,000 x $2) 40,000

EX.5:

Date Account Title Debit Credit

a) Cash 1,040,000
Share Capital – Preference (50,000 x $20) 1,000,000
Share Premium – Preference 40,000

b) Total Dividend $ 280,000

Less: Preference Shares Dividend (50,000 x $20 x 10%) 100,000
Ordinary Shares Dividend $ 180,000

c) Total Dividend $ 280,000

Less: Preference Shares Dividend
[(50,000 x $20 x 10%) x 3 yrs = 300,000] 280,000
(20,000 unpaid carry over to next year)
Ordinary Shares Dividend $ 0
EX.6:

Date Account Title Debit Credit

a) Share Dividends (19,950* x $16) 319,200
Ordinary Share Dividends Distributable (19,950 x $6) 119,700
Share Premium – Ordinary (19,950 x $10) 199,500
$600,000
*( + 33,000) x 15%
$6

b) Share Dividends (16,200* x $20) 324,000

Ordinary Share Dividends Distributable (16,200 x $8) 129,600
Share Premium – Ordinary (16,200 x $12) 194,400
$600,000
*( + 33,000) x 15%
$8

P-1

a)

Date Account Title Debit Credit

Jan 10 Cash (100,000 x $50) 5,000,000
Share Capital – Ordinary (100,000 x $20) 2,000,000
Share Premium – Ordinary 3,000,000

Mar 1 Cash (5,000 x $1,050) 5,250,000

Share Capital – Preference (5,000 x $1,000) 5,000,000
Share Premium – Preference 250,000

Apr 1 Land 920,000

Share Capital – Ordinary (18,000 x $20) 360,000
Share Premium – Ordinary 560,000

May 1 Cash (80,000 x $45) 3,600,000

Share Capital – Ordinary (80,000 x $20) 1,600,000
Share Premium – Ordinary 2,000,000
Aug 1 Organization Expense 300,000
Share Capital – Ordinary (10,000 x $20) 200,000
Share Premium – Ordinary 100,000

Sept 1 Cash (10,000 x $50) 500,000

Share Capital – Ordinary (10,000 x $20) 200,000
Share Premium – Ordinary 300,000

Nov 1 Cash (1,000 x $1,080) 1,080,000

Share Capital – Preference (1,000 x $1,000) 1,000,000
Share Premium – Preference 80,000
b)

Deccan Corporation
Statement of Financial Position (Partial)
December 31, 2020
Share Capital:
Share capital—preference 8%, $1,000 par value,
10,000 shares authorized, 6,000 shares issued and outstanding $ 6,000,000
Share capital—ordinary, no par, $20 stated value,
500,000 shares authorized, 218,000 shares issued and outstanding 4,360,000
Share premium—preference 330,000
Share premium—ordinary 5,960,000
Total share capital $ 16,650,000

P-2

a)

Date Account Title Debit Credit

Apr 1 Treasury Shares 180,000
Cash (10,000 x $18) 180,000

July 1 Cash (1,000 x $24) 24,000

Treasury Shares (1,000 x $18) 18,000
Share Premium – Treasury 6,000

Oct 1 Cash (5,000 x $20) 100,000

Treasury Shares (5,000 x $18) 90,000
Share Premium – Treasury 10,000

Nov 1 Cash (2,000 x $12) 24,000

Share Premium – Treasury (2,000 x $6) 12,000
Treasury Shares 36,000

Nov 31 Income Summary 68,000

Retained Earnings 68,000

b)

Elvis Company
Statement of Financial Position (Partial)
December 31, 2020
EQUITY
Share capital—ordinary, $10 par, 80,000 shares issued
and 78,000 outstanding $ 800,00 0
Share premium—ordinary 400,000
Share premium—treasury 4,000
Retained earnings 268,0 00
Less: Treasury shares (2,000 shares x $18) (36,000)
Total equity $ 1,436,000
P-3

a)

Date Account Title Debit Credit

Mar 1 Cash 175,000
Share Capital – Ordinary (35,000 x $1) 35,000
Share Premium – Ordinary 140,000

May 10 Cash 90,000

Treasury Shares (18,000 x $4) 72,000
Share Premium – Treasury 18,000

Aug 5 Patent 62,000

Share Capital – Ordinary (10,000 x $1) 10,000
Share Premium – Ordinary 52,000

Oct 20 Treasury Shares 7,800

Cash 7,800

Dec 31 Income Summary 560,000

Retained Earnings 560,000

b)

Donald Corporation
Statement of Financial Position (Partial)
December 31, 2020
EQUITY
Share capital—preference, 8%, $50 par value,
12,000 shares authorized and issued $ 600,000
Share capital—ordinary, no par, $1 stated value, 2,200,000
shares authorized, 1,245,000 shares issued and 1,231,700 shares outstanding 1,245,000
Share premium—preference 120,000
Share premium—ordinary 1,492,000
Share premium—treasury 18,000
Retained earnings 2,560,000
Less: Treasury shares (13,300 shares) (55,800)
Total Equity $ 5,979,200
P-4

a)

Date Account Title Debit Credit

Mar 1 Cash Dividends 80,000
Dividends Payable (40,000 x $2) 80,000

Apr 1 Dividends Payable 80,000

Cash 80,000

Memo — Five-for-one share split increases number of

May1 shares to 200,000 (40,000 X 5) and reduces par value to $5
per share

Aug 1 Share Dividends (20,000* x $8) 160,000

Ordinary Share Dividends Distributable (20,000 x $5) 100,000
Share Premium – Ordinary (20,000 x $3) 60,000
*200,000 x 0.10
Sep 1 Ordinary Share Dividends Distributable 100,000
Share Capital – Ordinary 100,000

Nov 1 Cash Dividends 220,000

Dividends Payable (220,000 x $1) 220,000

Dec 31 Income Summary 450,000

Retained Earnings 450,000

31 Retained Earnings 220,000

Cash Dividends 220,000

31 Retained Earnings 160,000

Share Dividends 160,000

b)

Paris Corporation
Statement of Financial Position (Partial)
December 31, 2020
EQUITY
Share capital—ordinary, $5 par value,
220,000 shares issued and outstanding $ 1,100,000
Share premium—ordinary 180,000
Retained Earnings 770,000
Total equity $ 2,050,000
P-5

a)

Date Account Title Debit Credit

Jan 1 Cash (200 x $160) 32,000
Share Capital – Preference (200 x $100) 20,000
Share Premium – Preference 12,000
1 Ordinary Share Dividends Distributable 45,000
Share Capital – Ordinary 45,000

Feb 7 Treasury Shares 44,000

Cash (2,000 x $22) 44,000

Apr 10 Cash (3,500 x $30) 105,000

Share Capital – Ordinary (3,500 x $10) 35,000
Share Premium – Ordinary 70,000

May 4 Cash (1,500 x $30) 45,000

Treasury Shares (1,500 x $22) 33,000
Share Premium – Treasury 12,000

Jun 1 Cash Dividends 21,000

Dividends Payable [(4,000 + 200) x $5] 21,000

30 Dividends Payable 21,000

Cash 21,000

Sep 5 Advertising Expense (1,500v x $20) 30,000

Share Capital – Ordinary (1,500 x $10) 15,000
Share Premium – Ordinary 15,000

Dec 1 Share Dividend (6,900* x $20) 138,000

Ordinary Share Dividends Distributable (6,900 x $10) 69,000
Share Capital – Ordinary 69,000
*69,000 x 10%

31 Income Summary 90,000

Retained Earnings 90,000

31 Retained Earnings 159,000

Share Dividends 138,000
Cash Dividends 21,000
b)

Malawi Company
Statement of Financial Position (Partial)
December 31, 2020
EQUITY
Share capital—preference,$100 par value,
10,000 shares authorized and 4,200 shares issued $ 420,000
Share capital—ordinary,$10 par, 1,000,000 shares authorized,
69,500 shares issued and 69,000 shares outstanding 695,000
Ordinary Share Dividend Distributable 69,000
Share premium—preference 132,000
Share premium—ordinary 394,000
Share premium—treasury 12,000
Retained earnings 115,000
Less: Treasury shares (500 x $22) (11,000)
Total equity $ 1,826,000

P-6

Date Account Title Debit Credit

Jan 12 Cash (50,000 x $6) 300,000
Share Capital – Ordinary (50,000 x $1) 50,000
Share Premium – Ordinary 250,000

Feb 15 Cash (20,000 x $55) 1,100,000

Share Capital – Preference (20,000 x $50) 1,000,000
Share Premium – Preference 100,000

Apr 15 Land 65,000

Share Capital – Ordinary (50,000 x $1) 50,000
Share Premium – Ordinary 15,000

July 1 Cash Dividends 50,000

Dividends Payable (20,000 x $2.50) 50,000

Aug 20 Dividends Payable 50,000

Cash 50,000

Sep 1 Treasury Shares 70,000

Cash (10,000 x $7) 70,000

Nov 15 Cash (5,000 x $9) 45,000

Treasury Shares (5,000 x $7) 35,000
Share Premium – Treasury 10,000

Dec 1 Cash (5,000 x $60) 300,000

Share Capital – Preference (11,000 x $50) 250,000
Share Premium – Preference 50,000
P-7

a)

Date Account Title Debit Credit

Jan 10 Cash 75,800
Share Capital – Ordinary (11,000 x $5) 55,000
Share Premium – Ordinary 20,800

Mar 13 Treasury Shares 17,500

Cash (3,500 x $5) 17,500

July 31 Cash 40,000

Treasury Shares (5,500 x $5) 27,500
Share Premium – Treasury 12,500

Oct 21 Patents 160,000

Share Capital – Ordinary (30,000 x $5) 150,000
Share Premium – Ordinary 10,000

Dec 31 Income Summary 1,345,000

Retained Earnings 1,345,000
b)

Rachel Corporation
Statement of Financial Position (Partial)
December 31, 2019
EQUITY
Share capital—preference,10%,$1,000 par,
8,000 shares authorized and 1,000 shares issued $ 1,000,000
Share capital—ordinary,$5 stated value, 20,000,000 shares authorized,
2,041,000 shares issued and 2,033,000 shares outstanding 10,205,000
Share premium—preference 250,000
Share premium—ordinary 2,530,800
Share premium—treasury 12,500
Retained earnings 2,343,000
Less: Treasury shares (8,000 x $5) (40,000)
Total equity $ 16,301,300
P-8

1.

Date Account Titles Debit Credit

Jan 5 Land (5,000 x $12) 60,000
Share Capital – Ordinary (5,000 x $10) 50,000
Share Premium – Ordinary 10,000

Jan 15 Ordinary Share Dividends Distributable 50,000

Share Capital – Ordinary 50,000

Feb 10 Cash (4,000 x $14) 56,000

Share Premium – Treasury 4,000
Treasury Share (4,000 x $15) 60,000

Mar 31 Cash Dividends 14,000

Cash 14,000

June 30 Share Dividend (1,900* x $12) 22,800

Ordinary Share Dividends Distributable (1,900 x $10) 19,000
Share Premium – Ordinary 3,800
*38,000 x 5%

June 30 Retained Earnings 36,800

Cash Dividend 14,000
Share Dividend 22,800

2. Equity Section:

Arab Corporation
Statement of Financial Position (Partial)
June 30, 2020
EQUITY
Share capital – Ordinary, $10 par value, 40,000 shares authorized,
40,000 shares issued and 38,000 shares outstanding $ 400,000
Ordinary share dividends distributable 19,000
Share premium-Ordinary 103,800
Share premium Treasury 36,000
Retained earnings 313,200
Less: Treasury share (2,000 shares) (30,000)
Total Equity $ 842,000
 Chapter 13: Investment
Problem 1:
a) .
Date Account Titile Dr Cr
a) Jan 1 Debt investment 80,000
Cash 80,000

July 1 Cash 2,400

Interest Revenue ($80,000 x 6% x x 1/2) 2,400

July 1 Cash 44,500

Debt investment 40,000
Gain on sales of debt investment 4,500

b) Dec 31 Interest Receivable 1,200

Interest Revenue ($40,000 x 6% x 1/2) 1,200

Problem 2:

Dr Cr
1) Jan 1, 2019 Debt investment 70,000
Cash 70,000

2) July 1 Cash 4,200

Interest revenue 4,200

3) Dec 31 Interest receivable 4,200

Interest revenue 4,200

4) Jan 1, 2020 Cash 4,200

Interest receivable 4,200

5) Jan 1, 2020 Cash 40,100

Gain on sale of debt investment 100
Debt investment 40,000

Problem 3:

Dr Cr
Feb 1 Share Investments 6,200
Cash 6,200

July 1 Cash 600

Dividend Revenue (600 x $1) 600

Sept 1 Cash 4,300

Share Investments ($6,200 x 300/600) 3,100
Gain on Sales of Share Investments 1,200

Dec 1 Cash 300

Dividend Revenue (300 x $1) 300
Problem 4:

Dr Cr
Jan 1 Share Investments 142,100
Cash 142,100

July 1 Cash 7,500

Dividend Revenue (2,500 x $3) 7,500

Dec 1 Cash 31,200

Share Investments ($142,100 x 500/2,500) 28,420
Gain on Sale of Share Investments 2,780

Dec 31 Cash 6,000

Dividend Revenue (2,000 x $3) 6,000

Problems 5
a)
Dr Cr
Feb 1 Share Investments – Joy 32,400
Cash 32,400

Mar 1 Share Investments – Aurelius 20,400

Cash 20,400

Apr 1 Debt Investments – Venice 50,000

Cash 50,000

July 1 Cash 360

Dividend Revenue ($0.60 x 600) 360

Aug 1 Cash 11,400

Share Investments [($32,400 ÷ 600) x 200] 10,800
Gain on Sales of Share Investments 600

Sept 1 Cash 800

Dividend Revenue (800 x $1) 800

Oct 1 Cash 1,750

Interest Revenue ($50,000 x 7% x 1/2) 1,750

Oct 1 Cash 49,000

Loss on Sale of Debt Investments 1,000
Debt Investments 50,000

Share Investments Debt Investments

Feb. 1 32,400 Aug. 1 10,800 Apr. 1 50,000 Oct. 1 50,000
Mar. 1 20,400
Dec. 31 Bal. 42,000 Dec. 31 Bal. 0
b)
Adjusting entry:
Dec 31 Unrealized Loss – Income 800
Fair Value Adjustment – Trading 800
$42,000 – $41,200

Security Cost Fair Value Unrealized gain (Loss)

Joy ordinary shares $21,600 $22,000 $ 400

Aurelius ordinary shares 20,400 19,200 (1,200)

$42,000 $41,200 $ (800)

c) Statement of financial position presentation of investment securities at December 31, 2020.

Current assets
Short-term investments, at fair value $ 41,200

Problems 6

a)
Dr Cr
Feb 1 Share Investments – Jack 30,800
Cash 30,800

Mar 1 Share Investments – Augustine 20,300

Cash 20,300

Apr 1 Debt Investments - Ronald 40,000

Cash 40,000

July 1 Cash 300

Dividend Revenue ($0.60 x 500) 300

Aug 1 Cash (300 x $69) 20,700

Share Investments [($30,800 ÷ 500) x 300] 18,480
Gain on Sales of Share Investments 2,220

Sept 1 Cash 600

Dividend Revenue (600 x $1) 600

Oct 1 Cash 1,800

Interest Revenue ($40,000 x 9% x 6/12) 1,800

Oct 1 Cash 44,000

Debt Investments 40,000
Gain on Sales of Debt Investment 4,000
 Share Investments Debt Investments
Feb. 1 30,800 Aug. 1 18,480 Apr. 1 40,000 Oct. 1 40,000
Mar. 1 20,300
Dec. 31 Bal. 32,620 Dec. 31 Bal. 0

b)
Adjusting entry:
Dec 31 Unrealized Loss – Income 2,020
Fair Value Adjustment – Trading 2,020
$32,620 – $30,600

Security Cost Fair Value Unrealized Gain (Loss)

Jack ordinary shares $12,320 $13,200 880

Augustine ordinary shares 20,300 17,400 (2,900)
$32,620 $30,600 (2,020)

c) Statement of financial position presentation of investment securities at December 31, 2020.

Current assets
Short-term investments, at fair value $ 30,600

Problems 7
a)
Dr Cr
July 1 Cash 5,000
Dividend Revenue (5,000 x $1) 5,000

Aug 1 Cash 1,000

Dividend Revenue (2,000 x $0.50) 1,000

Sept 1 Cash (1,500 x $8) 12,000

Loss on Sale of Share Investments 1,500
Share Investments 13,500

Oct 1 Cash (800 x $33) 26,400

Share Investments 24,000
Gain on Sales of Share of Investments 2,400

Nov 1 Cash 1,200

Dividend Revenue (1,200 x $1) 1,200

Dec 15 Cash 750

Dividend Revenue (1,500 x $0.50) 750

Dec 31 Cash 3,500

Dividend Revenue (3,500 x $1) 3,500
 Share Investments
2019 2019
Jan. 1 Balance 135,000 Sept. 1 13,500
Oct. 1 24,000
2019
Dec. 31 Balance 97,500

b)
Adjusting entry:
Dec 31 Unrealized Gain or Loss – Equity 4,100
Fair Value Adjustment – Non-Trading 4,100
$ 97,500 – $ 93,400

Security Cost Fair Value Unrealized Gain (Loss)

Trowbridge Co. Ordinary Shrs (60,000-24,000) $36,000 $38,400 2,400
Holly Co. Ordinary Shrs
Oriental Motors Co. Ordinary Shrs (45,000-13,500) 31,500 28,000 (3,500)
30,000 27,000 (3,000)
$97,500 $93,400 (4,100)

Problem 8:
a)
Dr Cr
July 1 Cash 5,000
Dividend Revenue (5,000 x $1) 5,000

Aug 1 Cash 2,000

Dividend Revenue (4,000 x $0.50) 2,000

Sept 1 Cash (1,500 x $8) 12,000

Share Investments [(1,500 ÷ 5,000) x $ 30,000] 9,000
Gain on Sales of Share Investments 3,000

Oct 1 Cash (600 x $30) 18,000

Share Investments [(600 ÷ 4,000) x $ 100,000] 15,000
Gain on Sales of Share Investments 3,000

Nov 1 Cash 3,400

Dividend Revenue (3,400 x $1) 3,400

Dec 15 Cash 1,500

Dividend Revenue (3,000 x $0.50) 1,500

Dec 31 Cash 3,500

Dividend Revenue (3,500 x $1) 3,500
 Share Investments
2019 2019
Jan. 1 Balance 190,000 Sept. 1 9,000
Oct. 1 15,000
2019
Dec. 31 Balance 166,000
b)

Security Cost Fair Value Unrealized Gain (Loss)

Threads Co. 3,400 x $25 = 85,000 78,200 (6,800)
Harrod Co.
Osaka Co. 3,500 x $6 = 21,000 24,500 3,500
3,000 x $20 = 60,000 57,000 (3,000)
166,000 159,700 (6,300)

Adjusting entry:
Dec 31 Unrealized Gain or Loss – Equity 6,300
Fair Value Adjustment – Non-Trading 6,300
$ 166,000 – $159,700
Problem 9:

Jan .1 Share investment 40,800

Cash 40,800

Apr 1 Debt investment 61,200

Cash 61,200

July 1 Cash ( 1,000shrs* $1) 1,000

Dividend revenue 1,000

Aug 1 Cash 6,250

Gain on sale of share investment 1,250
Share investment (500* $10) 5,000

Oct 1 Cash ($60,000*9%*1/2) 2,700

Interest revenue 2,700

Oct 1 Cash 53,900

Gain on sale of Debt investment 2,900
Debt investment (50/60 *61,200) 51,000

Dec 1 Cash ( $2* 1,000) 2,000

Dividend revenue 2,000

Dec 31 Interest receivable ($10,000*9%*1/2*3/12) 112.5

Interest revenue 112.5

Dec 31 Unrealized loss- Income 1,000

Fair value adjustment- Trading 1,000
(56,000 – 55,000)

Trading securities, December 31, 2020

Investments Cost Fair value

Winsent Co. Shares 500 x $10 = $ 5,000 500 x $14 = $7,000

MangMang Co. Shares 40,800 1,000 x $37 = 37,000

SonSon Co. bonds 10 x $1,020 = 10,200 10 x $1,100 = 11,000

56,000 55,000