At the beginning of January 2011 Belford Buckle Company held 500 shares of Wirl common stock in its investment portfolio of available for sale securities These shares had cost 9 000 and had a market value of 9 500 on January 1 2011 During 2011 Belford had several other transactions relating to its investments in available for sale securities as follows On January 7 Belford purchased 400 shares of Nirt common stock for 6 000 and on July 1 Belford purchased 10 10 000 bonds of Fess Company for 10 000 The bonds pay interest on June 30 and December 31 On August 5 Belford sold the 500 shares of Wirl common stock for 9 900 On December 15 Belford received cash dividends of 1 per share on the Nirt common stock and on December 31 it received the interest on the Fess bonds At the end of December the Nirt shares had a market value of 5 700 and the Fess Bonds had a market value of 10 200 Required 1 Record the 2011 investment transactions and events for Belford Keep track of the balance in the Investments account 2 Show how Belford would report the results of the investment transactions and events on its 2011 income statement and on its December 31 2011 balance sheet assuming it expects to sell the investments in 2012 1 Assets Cash 1 1 1 07 7 01 8 05 12 15 6 000 10 000 9 900 400 Liabilitie s Investments in Available forSale Securities 9 500 6 000 Stockholders Equity Unrealized Change In Market Value Of Investments Bal 500 Gain On Sale 500 900a Los s On Sale Div Rev Int Rev 10 000 9 500 12 31 500 12 31 100 Ending 5 200 15 900 Bal a Gain Cash received Cost a 900 9 900 9 000 b Security Cost Market Value Change Nirt Stock 6 000 5 700 300 Fess bonds 10 000 10 200 200 Total 16 000 15 900 100 2 2011 Income Statement 40 0 500 100 b 100 900 40 0 500 Other Items Gain on sale of investments 900 Dividend revenue 400 Interest revenue 500 2011 Balance Sheet Assets Current Assets Investments in available for sale securities 15 900 Stockholders Equity Unrealized change in market value of investments 100 On January 1 2011 Foley Aircraft Company purchased on the stock market 25 of Pet Helicopter Inc s 80 000 shares of common stock paying 5 25 per share On that date the book value of Pet s stockholders equity was 420 000 On December 31 2011 Foley reported a balance in its investment account for Pet of 120 000 Pet did not pay dividend in 2011 Required 1 How much did Foley pay for its investment in Pet 2 How much did Foley report as its 2011 income in regard to its investment in Pet 3 What was the total net income of Pet during 2011 1 Total shares of Pet 80 00080 000 x 25 20 000 shares purchased by Foley purchased by Foley 25 20 000 shares x 5 25 105 000 is the amount that Foley paid for the investment price per share 5 25 2 Original investment 105 000 Add 25 of net income X Book value of investment 12 31 11 120 000 X 15 000 income on investment Foley Aircraft Company 4 Net income Pet Helicopter Inc 15 000 25 60 000 On January 1 2011 Hoffman Company purchased 12 year zero coupon bonds issued by Martinez Company The bonds have a face value of 400 000 and were purchased to yield 8 Hoffman expects to hold these bonds until maturity so it uses the amortized cost method to account for its investment Required 1 Compute the purchase price of the bonds 2 Compute the interest revenue for 2011 and 2012 3 What is the book value of the bonds on December 31 2012 1 Purchase price present value of face value 400 000 x 0 3971 n 12 i 08 158 840 2 Interest revenue 2011 158 840 x 08 12 707 20 Interest revenue 2012 158 840 12 707 20 x 08 13 723 78 3 Book value of bonds at December 31 2012 158 840 12 707 20 13 723 78 185 270 98 During the month of July Sands Insurance Company entered into the following transactions Date Transaction July 1 Nancy Sands deposited a 30 000 personal check in the company s checking account 10 Purchased land and an office building at a cost of 2 000 and 21 000 respectively Paying 8 000 down and signing a 15 000 note due at the end of the year 25 Purchased office supplies costing 800 on credit Required 1 Prepare journal entries to record the preceding transactions 2 List the source documents normally used in recording each of these transactions 1 Dat e 7 01 Account Titles Cash Acct No Debit 30 00 0 N Sands Capital 7 10 Land Office Building 30 00 0 2 000 21 00 0 Cash Notes Payable 7 25 Credit Office Supplies Accounts Payable 8 000 15 00 0 800 800 2 Date Source Documents 7 01 N Sands personal check and receipt issued by Sands Realty Co 7 10 Co check legal documents for land and office building and note 7 25 Invoice received with supplies Both Plumbing Company entered into the following transactions during the month of May Date Ma 4 y 1 5 2 8 3 1 3 1 Transaction Installed plumbing in new house under construction contractor agreed to pay contract price of 1 800 in 30 days Made plumbing repairs for customer and collected 85 for service performed Paid 79 for May telephone bill Paid 900 to employees for May salaries Received 100 utility bill to be paid in early June Required 1 Prepare journal entries to record the preceding transactions 2 List the source documents normally used to records these transactions 1 Dat e 5 04 Account Titles and Explanations Accounts Receivable Acct No Debit 1 80 0 Plumbing Services Revenue 5 15 5 28 5 31 5 31 Date 5 04 5 15 5 28 5 31 5 31 1 800 Cash Plumbing Services Revenue 85 Telephone Expense Cash 79 85 79 Salaries Expense Cash 900 Utilities Expense Accounts Payable 100 2 Source Document Bill invoice issued to contractor Invoice and receipt issued to customer customer s check Telephone bill company check Payroll records company check Utility bill Credi t 900 100 At the end of the current year Rulem Hair Styling provides you with the following information a Depreciation expense on styling equipment totals 1 360 for the current year b Accrued interest on a note payable issued on October 1 amounts to 850 at year end c Unearned revenue rent in the amount of 1 000 has been earned the company records all receipts in advance in an Unearned Revenue account d Hair styling supplies used during the year total 210 the company records all purchases of supplies in an asset account Required Prepare adjusting entries at the end of the current year based on the preceding information Dat …