Finance

Situation 1
Riverbed Cosmetics acquired 10% of the 196,000 shares of common stock of Martinez Fashion at a total cost of $12 per share on March 18, 2017. On June 30, Martinez declared and paid $69,400 cash dividend to all stockholders. On December 31, Martinez reported net income of $116,600 for the year. At December 31, the market price of Martinez Fashion was $13 per share.

Situation 2
Marin, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 31,000 outstanding shares of common stock at a total cost of $8 per share on January 1, 2017. On June 15, Seles declared and paid cash dividends of $38,400. On December 31, Seles reported a net income of $92,500 for the year.

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Prepare all necessary journal entries in 2017 for both situations. (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.)

 

 

 

 

What is the new cost basis of the municipal bonds?

New cost basis of the municipal bonds

$

Given that the maturity value of the bonds is $791,000, should Swifty Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds?

 

 

 

 

 

 

At December 31, 2018, the fair value of the municipal bonds is $749,000. Prepare the entry (if any) to record this information. (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.)

 

 

 

Exercise 17-27

On August 15, 2016, Windsor Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $792. The notional value of the call option is 880 shares, and the option price is $88. The option expires on January 31, 2017. The following data are available with respect to the call option.

Market Price of Counting
Crows Shares

Prepare the journal entries for Windsor for the following dates.

Investment in call option on Counting Crows shares on August 15, 2016.

September 30, 2016—Windsor prepares financial statements.

December 31, 2016—Windsor prepares financial statements.

January 15, 2017—Windsor settles the call option on the Counting Crows shares.

(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

(To record the change in intrinsic value.)

(To record the time value change.)

(To record the change in intrinsic value.)

(To record the time value change.)

(To record the time value change.)

(To record settlement of call option.)

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