Garfield Company purchased, as a

Garfield Company purchased, as a held-to-maturity investment

Garfield Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for (a) the purchase of the investment and (b) the receipt of annual interest and discount amortization. Assume effective interest amortization is used.(Round answers to zero decimal places, e.g. 25,000. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Garfield Company purchased, as an available-for-sale securities, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. The bonds have a year-end fair value of $75,500. Assume effective interest amortization is used.

Carow Corporation purchased, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carows’ journal entries for (a) the purchase of the investment, and (b) the receipt of semiannual interest and premium amortization. Assume effective interest amortization is used.

Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock as an available-for-sale investment for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $34.50 per share. Prepare Fairbanks’s journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.

Cleveland Company has a stock portfolio valued at $4,000. Its cost was $3,300. If the Securities Fair Value Adjustment (Available-for-Sale) account has a debit balance of $200, prepare the journal entry at year-end.

The following information relates toStarbucksfor 2009: net income $390.8 million; unrealized holding gain of $9.8 million related to available-for-sale securities during the year; accumulated other comprehensive income of $48.4 on September 28, 2008.(For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)

 

Hillsborough Co. has an available-for-sale investment in the bonds of Schuyler with a carrying (and fair) value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It is determined that this loss in value is other-than temporary. Prepare the journal entry, if any, to record the reduction in value.

On January 1, 2011, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2011, and mature January 1, 2016, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.(Round your answers to 2 decimal places, e.g. 25,100.25.)

On January 1, 2011, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2011, and mature on January 1, 2016, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the available-for-sale category.

The fair value of the bonds at December 31 of each year-end is as follows:

	2011	$534,200
	2012	$515,000
	2013	$513,000
	2014	$517,000
	2015	$500,000

 

(a)	Prepare the journal entry at the date of the bond purchase.(Round your answers to 2 decimal places, e.g. 2,510.25)

(b)	Prepare the journal entries to record the interest received and recognition of fair value for 2011.(Round your answers to 2 decimal places, e.g. 25,250.10. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

(c)

Prepare the journal entry to record the recognition of fair value for 2012. Assume that the entry to record interest revenue has already been made.(Round your answers to 2 decimal places, e.g. 2,250.25. In computing amortized cost (carrying value) of the bonds at the end of each year, round your computation to 2 decimal places, e.g. 2.250.25 and use the rounded amount for subsequent computation.)

Brooks Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks has had a policy of investing idle cash in equity securities. In particular, Brooks has made periodic investments in the company’s principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Brooks does not have significant influence over the operations of Norton Industries.

Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2012 year-end adjusting entries for the accounts that are valued by the “fair value” rule for financial reporting purposes. Thomas has gathered the following information about Brooks’ pertinent accounts.

 

Brooks has trading securities related to Delaney Motors and Patrick Electric. During this fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; these shares currently have a market value of $1,600,000. Brooks’ investment in Patrick Electric has not been profitable; the company acquired 50,000 shares of Patrick in April 2012 at $20 per share, a purchase that currently has a value of $720,000.

Prior to 2012, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,500,000 on December 31, 2011. Brooks’ 12% ownership of Norton Industries has a current market value of $22,225,000.