This document contains 8 questions pertaining to accounting for various types of investments. The questions cover topics such as preparing journal entries for the purchase and sale of investments, recording dividends and interest received, and adjusting investments to fair value. Journal entries are required to record investments classified as held-to-maturity, available-for-sale, and trading. Financial statement presentation of investments is also addressed.
This document contains 8 questions pertaining to accounting for various types of investments. The questions cover topics such as preparing journal entries for the purchase and sale of investments, recording dividends and interest received, and adjusting investments to fair value. Journal entries are required to record investments classified as held-to-maturity, available-for-sale, and trading. Financial statement presentation of investments is also addressed.
This document contains 8 questions pertaining to accounting for various types of investments. The questions cover topics such as preparing journal entries for the purchase and sale of investments, recording dividends and interest received, and adjusting investments to fair value. Journal entries are required to record investments classified as held-to-maturity, available-for-sale, and trading. Financial statement presentation of investments is also addressed.
This document contains 8 questions pertaining to accounting for various types of investments. The questions cover topics such as preparing journal entries for the purchase and sale of investments, recording dividends and interest received, and adjusting investments to fair value. Journal entries are required to record investments classified as held-to-maturity, available-for-sale, and trading. Financial statement presentation of investments is also addressed.
UNIVERSITAS INDONESIA Praktikum Akuntansi Keuangan
Program Pendidikan Vokasi
Genap 2023/2024
PERTANYAAN PEMICU TOPIK 3 : INVESTMENT
1. On January 1, 2022, Garfield AG made an investment in €100,000 of the 9%, 5-year
bonds of Chester Corporation for €92,608, which provides an 11% return. Garfield plans to hold these bonds to collect contractual cash flows. Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest on December 31, 2022 and discount amortization. And (c) the reporting of investment in financial statements. (10%) 2. Use the information from number 1, but assume the bonds are purchased as a held- for-collection and selling investment. Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of €95,000. And, the reporting in the financial statements. (15%) 3. Use the information from number 1, but assume Garfield plans to actively trade the bonds to profit from market interest rate changes. Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, (c) the year-end fair value adjustment. The bonds have a year-end fair value of €95,000. And, (c) the reporting in the financial statements. (15%) 4. Hillsborough Co. has a held-for-collection investment in the bonds of Schuyler Corp. with a carrying (and fair) value of $90,000. The investment has a term of six years, with annual interest payment at 8%, paid at the end of each year. Due to poor economic prospects for Schuyler, Hillsborough determined that it will not be able to collect all contractual cash flows and the bonds have decreased in value to $75,000. It is determined that this is a permanent loss in value. Prepare the journal entry, if any, to record the reduction in value. And, the reporting in financial statement (10%) 5. Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as an investment for £13,200. During the year, Sherman paid a cash dividend of £3.25 per share. At year-end, Sherman shares were selling for £34.50 per share. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment, in the following two assumptions: (10%) 1) If the ordinary shares are Trading Investment 2) If the ordinary shares are Non-Trading Investment
6. On January 1, 2022, Meredith plc purchased 23% of the ordinary shares of Pirates Company for £175,000. During the year, Pirates earned net income of £95,000 and paid dividends of £21,850. Prepare the entries for Meredith to record the purchase and any additional entries related to this investment in Pirates Company in 2022. UNIVERSITAS INDONESIA Praktikum Akuntansi Keuangan Program Pendidikan Vokasi Genap 2023/2024
7. At December 31, 2022, the equity investment portfolio HFCS for Wenger, Inc. is as follows.
Unrealized Gain Investment Cost Fair Value (Loss) A 17500 15000 -2500 B 12500 14000 1500 C 23000 25500 2500 53000 54500 1500 Previous fair value adjustment balance - Debit 200 Fair value adjustment - Debit 1300
On January 20, 2023, Wenger, Inc. sold investment A for $15,300. The sale proceeds are net of brokerage fees. Prepare the adjusting entry at December 31, 2023, to report the portfolio at fair value. And, show the financial statements presentation of the investment-related accounts at December 31, 2023. The fair value of investment B & C are 15,000 & 26,000 and net income in 2023 is 350,000 (20%)
8. Cameron Company has a portfolio of 8% debt investments that it has
managed as a trading investment. At December 31, 2022, Cameron had the following balances related to this portfolio: debt investments, £250,000; fair value adjustment, £10,325 (Dr). Cameron management decides to change its business model for these investments to a held-for-collection strategy, beginning in January 2023. Prepare the journal entry to transfer these investments to the held-for-collection classification. (10%)
