Financial Accounting: An Integrated Statements Approach, 2nd Edition

Alternate Problem

12-4B

Entries for bond investments

Patents $ 55,000

Preferred 6–^23 % stock, $100 par (30,000 shares authorized; 15,000 shares issued) 1,500,000

Prepaid expenses 15,900

Retained earnings, November 1, 2005 2,446,150

Temporary investment in marketable equity securities 145,000

Treasury stock (2,000 shares of common stock at cost of $35 per share) 70,000

Unrealized loss (net of tax) on temporary equity securities 24,000

Instructions

1. Prepare a multiple-step income statement for the year ended October 31, 2006, concluding
   with earnings per share. In computing earnings per share, assume that the average number
   of common shares outstanding was 150,000 and preferred dividends were $100,000. Assume
   that the gain on condemnation of land is an extraordinary item.


2. Prepare a retained earnings statement for the year ended October 31, 2006.


3. Prepare a balance sheet in report form as of October 31, 2006.

Samson Company is a wholesaler of men’s hair products. The following transactions relate

to certain securities acquired by Samson Company, which has a fiscal year ending on

December 31:

2006

Jan. 3 Purchased 3,000 shares of the 40,000 outstanding common shares of Davidson

Corporation at 67 per share plus commission and other costs of $468.

July 2 Received the regular cash dividend of $1.30 a share on Davidson Corporation

stock.

Dec. 5 Received the regular cash dividend of $1.30 a share plus an extra dividend of $0.10 a

share on Davidson Corporation stock.

(Assume that all intervening transactions have been recorded properly and that the

number of shares of stock owned have not changed from December 31, 2006, to

December 31, 2009.)

2010

Jan. 2 Purchased an influential interest in Comstock, Inc., for $760,000 by purchasing 24,000

shares directly from the estate of the founder of Comstock. There are 80,000 shares of

Comstock, Inc., stock outstanding.

July 6 Received the regular cash dividend of $1.30 a share and a 3% stock dividend on the

Davidson Corporation stock.

Oct. 23 Sold 750 shares of Davidson Corporation stock at 78. The broker deducted commission

and other costs of $140, remitting the balance.

Dec. 10 Received a cash dividend at the new rate of $1.50 a share on the Davidson Corporation

stock.

31 Received $32,000 of cash dividends on Comstock, Inc., stock. Comstock, Inc., reported net

income of $350,000 in 2010. Samson uses the equity method of accounting for its

investment in Comstock, Inc.

Instructions

Journalize the entries for the preceding transactions.

The following selected transactions relate to certain securities acquired by Wildflower Blueprints,

Inc., whose fiscal year ends on December 31:

2006

Sept. 1 Purchased $400,000 of Churchill Company 20-year, 9% bonds dated July 1, 2006, directly

from the issuing company, for $385,720 plus accrued interest of $6,000.

572 Chapter 12 Special Income and Investment Reporting Issues

Alternate Problem

12-3B

Entries for investments in stock

Goal 3

GENERAL LEDGER