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1.The following transactions relate to the stockholders' equity transactions of Lindsay Corporation for its initial year of existence.
(a) Jan. 7 Articles of incorporation are filed with the state. The state authorized the issuance of 10,000 shares of $50 par value preferred stock and 200,000 shares of $10 par value common stock.
(b) Jan. 28 40,000 shares of common stock are issued for $14 per share.
(c) Feb. 3 80,000 shares of common stock are issued in exchange for land and buildings that have an appraised value of $250,000 and $1,000,000, respectively. The stock traded at $15 per share on that date on the over-the-counter market.
(d) Feb. 24 2,000 shares of common stock are issued to Shane and Winston, Attorneys-at-Law, in payment for legal services rendered in connection with incorporation. The company charged the amount to organization costs. The market value of the stock was $16 per share.
(e) Sep. 12 Received subscriptions for 10,000 shares of preferred stock at $53 per share. A 40 percent down payment accompanied the subscriptions. The balance is due on October 1.
(f) Oct. 1 Received the final payment for 10,000 shares of preferred stock.
Prepare journal entries to record the foregoing transactions. Identify the entries by letter (a - f).
a.) Memorandum Entry: Received authorization to issue 10,000 shares of $50 par value preferred stock and 200,000 shares of $10 par value common stock today January 7.
b.) Jan 28
Cash 560,000
Common Stock 400,000
Paid-in-capital in excess of par 160,000
c.) Feb. 3
Land 250,000
Building 1,000,000
Common stock 800,000
Paid-in Capital in Excess of Par 450,000
d.) Feb. 24
Organization Service Expense 32,000
Common Stock 32,000
Pg 757
e.) Sept. 12
Preferred Stock Subscriptions Receivable 530,000
Preferred Stock Subscribed 500,000
Paid-in Capital in Excess of Par 30,000
Cash 212,000
Preferred Stock Subscriptions Receivable 212,000
f.) Cash 318,000
Preferred Stock Subscriptions Receivable 318,000
Preferred stock Subscribed 500,000
Preferred stock 500,000
2. On August 10, Jameson Corporation reacquired 8,000 shares of its $100 par value common stock at $134. The stock was originally issued at $110. The shares were resold on November 21 at $145.
Provide the entries required to record the reacquisition and the subsequent resale of the stock using the:
(1) Par value method of accounting for treasury stock.
(2) Cost method of accounting for treasury stock.
1.)
Aug. 10
Treasury Stock (8,000 shares x $100 par) 800,000
Paid-in Capital in Excess of Par 80,000
Retained Earnings ($1,072,000 - $880,000) 192,000
Cash 1,072,000
Nov. 21
Cash 1,160,000
Treasury Stock 8,000
Paid-in Capital in Excess of Par 1,152,000
2.)
Aug. 10
Treasury Stock 1,072,000
Cash 1,072,000
$1,072,000/8,000 shares = $134
Nov 21
Cash 1,160,000
Treasury Stock (8,000 shares x $134) 1,072,000
Paid-in Capital from Treasury Stock 88,000
3. In 2008, KZF Inc. purchased stock as follows:
(a) Acquired 2,000 shares of Gallery Arts Corp. common stock (par value $20) in exchange for 1,200 shares of KZF Inc. preferred stock (par value $30). The preferred stock had a market value of $75 per share on the date of the exchange.
(b) Purchased 800 shares of Champion Corp. common stock (par value $10) at $70 per share, plus a brokerage fee of $800.
At December 31, 2008, the market values of the securities were as follows:
Security Market Value
KZF Inc.. . $71
Gallery Arts Corp.. . 41
Champion Corp.. . 72
The investments in common stock are classified by KZF Inc. as available-for-sale securities accounted for by the cost method. The fiscal year of KZF ends on December 31.
(1) Prepare all entries relating to the investments in common stock for 2008.
(2) Prepare the entry to record the sale of 200 shares of Champion Corp. common stock on January 15, 2009, at $74 per share.
(3) Prepare the entry to reclassify the remaining 600 shares of Champion Corp. common stock from available-for-sale securities to trading securities on January 31, 2009. The stock was selling at $67 per share on that date.
1.) a.) Common Stock, $20 par 40,000
Paid-in Capital in Excess of Par-Preferred 50,000
Preferred Stock, $30 par 36,000
Paid-In Capital in Excess of Par-Common 54,000
b.) Investment in available-for-sale Securities 56,800
Cash 56,800
2.) Cash (200 shares x $74) 14,800
Investment in available-for-sale securities 14,200*
Realized Gain on Sale of Securities 600
3.) Investment in Trading Securities (600 x $72) 43,200
Market Adjustment-Available-for-sale Securities 3,000
Unrealized Loss on Transfer of Securities 1,200
Unrealized Increase/Decrease in Value of Available-for-sale Securities 3,000
Investment in Available-for-Sale Securities 44,400
4. Webster Inc. carries the following marketable equity securities on its books at December 31, 2007, and 2008. All securities were purchased during 2007 and there were no beginning balances in any market adjustment accounts.
Trading Securities:
Market Market
Cost December 31, 2007 December 31, 2008
V Company $ 50,000 $ 26,000 $ 40,000
W Company 26,000 40,000 40,000
X Company 70,000 60,000 50,000
Total $146,000 $126,000 $130,000
Available-for-Sale Securities:
Y Company $420,000 $360,000 $200,000
Z Company 100,000 120,000 240,000
Total $520,000 $480,000 $440,000
The cost method is used in accounting for all investments in securities.
(1) Give the entries necessary to record the valuations for both trading and available-for-sale securities at December 31, 2007 and 2008.
(2) What net effect would these valuations have on 2007 and 2008 net income?
5.On January 1, 2008, Alsop Corp. acquired 30 percent (13,000 shares) of Stone Services Inc. common stock for $1,300,000 as a long-term investment. Data from Stone's 2008 financial statements include the following:
Net income... $330,000
Less cash dividends paid... 160,000
Increase in retained earnings... $170,000
The market value of Stone Services Inc. common stock on December 31, 2008, was $98 per share. Alsop does not have any other noncurrent investments in securities.
Prepare the necessary journal entries for Alsop's investment in Stone Services Inc. common stock under
(1) the cost method classified as available-for-sale securities.
(2) the equity method.
Jan 1, 2008
Investment in Available-for-Sale Securities 1,300,000
Cash 1,300,000
(13,000 x $100 per share)
Dec 31
Market Adjustment-Available-for-Sale Securities 26,000
Unrealized Increase/Decrease in value of Available-
For-Sale Securities 26,000
2.)
Jan 1, 2008
Investment in Stone Services Inc. Stock 1,300,000
Cash 1,300,000
Investment in Stone Services Inc. Stock 99,000
Income from investment in Stone Services Inc. Stock 99,000*
*(330,000 x 30%)
To record the purchase of 30% of Stone Services Inc. Common Stock
Cash 48,000
Investment in Stone Services Inc. 48,000
To record the receipt of dividends
6. On July 1, 2005, Hawkeye Aviation leased two helicopters from Honnicutt Aircraft for an initial period of 12 months with a provision for a continuation on a month-to-month basis. The lease is properly classified as an operating lease. Lease payments are to be made as follows:
First two months... $15,000 per month
Second three months... 12,000 per month
Third three months... 10,000 per month
Last four months... 8,000 per month
After the first year, the rent continues at $6,000 per month. Provide the entries required to record the lease payments for the first year on the books of
(1) Hawkeye Aviation.
(2) Honnicutt Aircraft.
1.) Hawkeye Aviation Lessee
Month 1
Rent Expense 10,667
Rent Payable 4,333
Cash 15,000
Month 2
Rent Expense 10,667
Rent Payable 4,333
Cash 15,000
Month 3
Rent Expense 10,667
Rent Payable 1,333
Cash 12,000
Month 4
Rent Expense 10,667
Rent Payable 1,333
Cash 12,000
Month 5
Rent Expense 10,667
Rent Payable 1,333
Cash 12,000
Month 6
Rent Expense 10,667
Rent Payable 667
Cash 10,000
Month 7
Rent Expense 10,667
Rent Payable 667
Cash 10,000
Month 8
Rent Expense 10,667
Rent Payable 667
Cash 10,000
Month 9
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000
Month 10
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000
Month 11
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000
Month 12
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000
2.) Honnicutt Aircraft- Lessor
Month 1
Cash 15,000
Rent Revenue 15,000
Month 2
Cash 15,000
Rent Revenue 15,000
Month 3
Cash 12,000
Rent Revenue 12,000
Month 4
Cash 12,000
Rent Revenue 12,000
Month 5
Cash 12,000
Rent Revenue 12,000
Month 6
Cash 10,000
Rent Revenue 10,000
Month 7
Cash 10,000
Rent Revenue 10,000
Month 8
Cash 10,000
Rent Revenue 10,000
Month 9
Cash 8,000
Rent Revenue 8,000
Month 10
Cash 8,000
Rent Revenue 8,000
Month 11
Cash 8,000
Rent Revenue 8,000
Month 12
Cash 8,000
Rent Revenue 8,000
Assume fiscal year June to July.
This is what I come up with, please check them over and let me know if I have not done them correctly and how to do them.
Thanks
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