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P13-1A Accounting Question from texbook Weygandt, Kimmel &

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P13-1A Accounting Question from texbook: Weygandt, Kimmel & Kieso (2008) Financial Accounting (6th edition) Hoboken, NJ

 

Submitted: 4 years ago.
Category: Homework
Expert:  Linda_us replied 4 years ago.
HiCustomerbr />
I can help you if you can post the complete question.

Regards

Linda
Customer: replied 4 years ago.

Here you go.

 

 

P13-1A

Davison Carecenters Inc. provides financing and capital to the health-care industry, with a particular focus on nursing homes for the elderly. The following selected transactions relate to bonds acquired as an investment by Davison, whose fiscal year ends on December 31.

2008

 

 

Jan. 1

 

Purchased at par $2,000,000 of Hannon Nursing Centers, Inc., 10-year, 8% bonds dated January 1, 2008, directly from Hannon.

July 1

 

Received the semiannual interest on the Hannon bonds.

Dec. 31

 

Accrual of interest at year-end on the Hannon bonds.

(Assume that all intervening transactions and adjustments have been properly recorded and that the number of bonds owned has not changed from December 31, 2008, to December 31, 2010.)

2011

 

 

Jan. 1

 

Received the semiannual interest on the Hannon bonds.

Jan. 1

 

Sold $1,000,000 Hannon bonds at 106. The broker deducted $6,000 for commissions and fees on the sale.

July 1

 

Received the semiannual interest on the Hannon bonds.

Dec. 31

 

Accrual of interest at year-end on the Hannon bonds.

 

 

 

 

 

 

 

 

 

 

Journalize the listed transactions for the years 2008 and 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date

Account / Description

Debit

Credit

2008

 

Jan.1

Unrealized gain-incomeRevenue from investmentMarket adjustment-Available-for-saleDebt investmentsLoss on sale of stock investmentsGain on sale of debt investmentsUnrealized gain or loss-EquityCashInterest revenueInterest receivableLoss on Sale of Debt investmentUnrealized loss-incomeStock investmentsDividend revenueGain on sale of stock investmentsMarket adjustment-trading

$

 

Loss on Sale of Debt investmentInterest receivableMarket adjustment-tradingGain on sale of stock investmentsUnrealized gain-incomeLoss on sale of stock investmentsMarket adjustment-Available-for-saleRevenue from investmentUnrealized loss-incomeDividend revenueGain on sale of debt investmentsInterest revenueCashUnrealized gain or loss-EquityStock investmentsDebt investments

$

July1

Interest receivableLoss on sale of stock investmentsStock investmentsGain on sale of debt investmentsCashDebt investmentsDividend revenueGain on sale of stock investmentsRevenue from investmentUnrealized loss-incomeInterest revenueMarket adjustment-Available-for-saleUnrealized gain or loss-EquityMarket adjustment-tradingUnrealized gain-incomeLoss on Sale of Debt investment

$

 

Dividend revenueMarket adjustment-tradingInterest revenueRevenue from investmentMarket adjustment-Available-for-saleUnrealized gain or loss-EquityLoss on sale of stock investmentsStock investmentsDebt investmentsUnrealized loss-incomeCashGain on sale of stock investmentsInterest receivableUnrealized gain-incomeGain on sale of debt investmentsLoss on Sale of Debt investment

$

Dec. 31

Revenue from investmentUnrealized loss-incomeLoss on Sale of Debt investmentLoss on sale of stock investmentsMarket adjustment-tradingGain on sale of stock investmentsInterest receivableCashDebt investmentsUnrealized gain-incomeStock investmentsDividend revenueInterest revenueMarket adjustment-Available-for-saleGain on sale of debt investmentsUnrealized gain or loss-Equity

$

 

Unrealized gain or loss-EquityDividend revenueLoss on sale of stock investmentsGain on sale of stock investmentsStock investmentsRevenue from investmentGain on sale of debt investmentsUnrealized loss-incomeMarket adjustment-tradingUnrealized gain-incomeDebt investmentsCashLoss on Sale of Debt investmentInterest receivableMarket adjustment-Available-for-saleInterest revenue

$

2011

 

Jan. 1

Debt investmentsDividend revenueRevenue from investmentMarket adjustment-tradingLoss on sale of stock investmentsUnrealized gain or loss-EquityUnrealized loss-incomeInterest receivableGain on sale of debt investmentsMarket adjustment-Available-for-saleStock investmentsGain on sale of stock investmentsUnrealized gain-incomeLoss on Sale of Debt investmentInterest revenueCash

$

 

Interest revenueCashRevenue from investmentStock investmentsGain on sale of debt investmentsDebt investmentsUnrealized gain-incomeMarket adjustment-Available-for-saleGain on sale of stock investmentsUnrealized gain or loss-EquityMarket adjustment-tradingInterest receivableLoss on sale of stock investmentsLoss on Sale of Debt investmentUnrealized loss-incomeDividend revenue

$

Jan. 1

Debt investmentsLoss on sale of stock investmentsMarket adjustment-Available-for-saleInterest receivableGain on sale of debt investmentsDividend revenueInterest revenueCashUnrealized gain or loss-EquityStock investmentsLoss on Sale of Debt investmentGain on sale of stock investmentsRevenue from investmentUnrealized loss-incomeMarket adjustment-tradingUnrealized gain-income

$

 

Gain on sale of stock investmentsMarket adjustment-Available-for-saleCashStock investmentsGain on sale of debt investmentsDebt investmentsInterest revenueInterest receivableMarket adjustment-tradingUnrealized gain-incomeUnrealized gain or loss-EquityLoss on sale of stock investmentsRevenue from investmentUnrealized loss-incomeLoss on Sale of Debt investmentDividend revenue

$

 

Dividend revenueUnrealized loss-incomeUnrealized gain-incomeRevenue from investmentCashLoss on Sale of Debt investmentMarket adjustment-tradingLoss on sale of stock investmentsGain on sale of debt investmentsUnrealized gain or loss-EquityInterest receivableDebt investmentsInterest revenueMarket adjustment-Available-for-saleStock investmentsGain on sale of stock investments

$

July 1

Gain on sale of debt investmentsRevenue from investmentLoss on sale of stock investmentsMarket adjustment-tradingDividend revenueUnrealized loss-incomeGain on sale of stock investmentsUnrealized gain or loss-EquityMarket adjustment-Available-for-saleUnrealized gain-incomeCashStock investmentsInterest receivableDebt investmentsLoss on Sale of Debt investmentInterest revenue

$

 

CashDividend revenueInterest receivableInterest revenueGain on sale of debt investmentsRevenue from investmentUnrealized loss-incomeMarket adjustment-Available-for-saleDebt investmentsUnrealized gain or loss-EquityMarket adjustment-tradingStock investmentsUnrealized gain-incomeLoss on Sale of Debt investmentGain on sale of stock investmentsLoss on sale of stock investments

$

Dec. 31

Gain on sale of stock investmentsLoss on Sale of Debt investmentLoss on sale of stock investmentsCashDebt investmentsUnrealized gain-incomeInterest revenueDividend revenueMarket adjustment-Available-for-saleUnrealized loss-incomeUnrealized gain or loss-EquityGain on sale of debt investmentsInterest receivableStock investmentsRevenue from investmentMarket adjustment-trading

$

 

Revenue from investmentInterest revenueLoss on sale of stock investmentsGain on sale of debt investmentsLoss on Sale of Debt investmentUnrealized loss-incomeUnrealized gain or loss-EquityInterest receivableMarket adjustment-tradingDividend revenueUnrealized gain-incomeCashMarket adjustment-Available-for-saleDebt investmentsGain on sale of stock investmentsStock investments

$

 

 

 

 

 

 

 

 

 

 

Assume that the fair value of the bonds at December 31, 2008, was $2,200,000. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value.

Date

Account / Description

Debit

Credit

Dec. 31

Unrealized gain or loss-EquityRevenue from investmentUnrealized loss-incomeCashGain on sale of debt investmentsDividend revenueLoss on Sale of Debt investmentInterest revenueMarket adjustment-tradingLoss on sale of stock investmentsUnrealized gain-incomeMarket adjustment-Available-for-saleInterest receivableDebt investmentsStock investmentsGain on sale of stock investments

$

 

Debt investmentsStock investmentsGain on sale of stock investmentsDividend revenueCashUnrealized loss-incomeUnrealized gain or loss-EquityLoss on sale of stock investmentsRevenue from investmentUnrealized gain-incomeMarket adjustment-Available-for-saleInterest revenueInterest receivableMarket adjustment-tradingLoss on Sale of Debt investmentGain on sale of debt investments

$

 

 

 

 

 

 

 

 

 

 

Based on your analysis in part (b) of the question, show the balance sheet presentation of the bonds and interest receivable at December 31, 2008. Assume the investments are considered long-term.

Balance Sheet

InvestmentsProperty, plant and equipmentCurrent assetsCurrent liabilitiesLong-term debtStockholders' equity

Debt investments, at equityShort-term investments at equityInterest receivableDebt investments, at fair valueInterest payableShort-term investments at fair value

$

 

Stockholders' equityInvestmentsCurrent assetsProperty, plant and equipmentCurrent liabilitiesLong-term debt

Debt investments, at fair valueInterest payableShort-term investments at equityDebt investments, at equityInterest receivableShort-term investments at fair value

$

The unrealized gain or loss would reported in the Property, plant and equipmentCost of goods soldStockholders' equityOther revenues and gainsOperating expensesCurrent liabilitiesOther expenses and lossesLong-term liabilitiesCurrent assetsRevenuessection of the retained earnings statementbalance sheetincome statement.

 

 

 

 

Expert:  Linda_us replied 4 years ago.
Working on the solution. Whats your deadline for this.
Customer: replied 4 years ago.

It is due tomorrow at noon. Let me give you a more easy-to-read version. Here you go.

 

P13-1A

Davison Carecenters Inc. provides financing and capital to the health-care industry, with a particular focus on nursing homes for the elderly. The following selected transactions relate to bonds acquired as an investment by Davison, whose fiscal year ends on December 31.

2008

 

 

Jan. 1

 

Purchased at par $2,000,000 of Hannon Nursing Centers, Inc., 10-year, 8% bonds dated January 1, 2008, directly from Hannon.

July 1

 

Received the semiannual interest on the Hannon bonds.

Dec. 31

 

Accrual of interest at year-end on the Hannon bonds.

(Assume that all intervening transactions and adjustments have been properly recorded and that the number of bonds owned has not changed from December 31, 2008, to December 31, 2010.)

2011

 

 

Jan. 1

 

Received the semiannual interest on the Hannon bonds.

Jan. 1

 

Sold $1,000,000 Hannon bonds at 106. The broker deducted $6,000 for commissions and fees on the sale.

July 1

 

Received the semiannual interest on the Hannon bonds.

Dec. 31

 

Accrual of interest at year-end on the Hannon bonds.

 

 

 

 

 

 

 

 

 

 

Journalize the listed transactions for the years 2008 and 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date

Account / Description

Debit

Credit

2008

 

Jan.1

 

$

 

$

July1

 

$

 

$

Dec. 31

 

$

 

$

2011

 

Jan. 1

 

$

 

$

Jan. 1

 

$

 

$

 

$

July 1

 

$

 

$

Dec. 31

 

$

 

$

 

 

 

 

 

 

 

 

 

 

Assume that the fair value of the bonds at December 31, 2008, was $2,200,000. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value.

Date

Account / Description

Debit

Credit

Dec. 31

 

$

 

$

 

 

 

 

 

 

 

 

 

 

Based on your analysis in part (b) of the question, show the balance sheet presentation of the bonds and interest receivable at December 31, 2008. Assume the investments are considered long-term.

Balance Sheet

 

$

 

 

$

The unrealized gain or loss would reported in the Property, plant and equipmentCost of goods soldStockholders' equityOther revenues and gainsOperating expensesCurrent liabilitiesOther expenses and lossesLong-term liabilitiesCurrent assetsRevenuessection of the retained earnings statementbalance sheetincome statement.

 

 

 

 

 

 

Expert:  Linda_us replied 4 years ago.
I will post answer today by midnight.

Edited by linda_us on 3/1/2010 at 9:03 PM EST
Customer: replied 4 years ago.
Thanks
Expert:  Linda_us replied 4 years ago.
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