Advanced Accounting by Susan Hamlen | SOLUTIONS MANUAL & TEST BANK

,
,7. b

Reported net income; 35% x $7,000,000 = $ 2,450,000
Less unconfirmed profit on ending inventory
35% x [$6,000,000 – ($6,000,000/1.25)] = (420,000)
Equity in net income for 2020 $ 2,030,000
Less dividends; 35% x $2,000,000 (700,000)
Plus beginning investment balance 50,000,000
Ending investment balance $51,330,000

8. d

Fizzy’s entry to record the acquisition is:

Current assets 25,000
Property 2,500,000
Goodwill 25,475,000
Liabilities 3,000,000
Cash 25,000,000

9. b

10. a

, EXERCISES

E1.1 Investment in Trading Securities

(in millions)

a. $384 – 39 = $345

b. Unrealized gains and losses on trading securities are reported in income.

c.
Investment in trading securities 345
Cash 345

Investment in trading securities 39
Gain on trading securities (income) 39

d.
Cash 370
Loss on trading securities (income) 14
Investment in trading securities 384


E1.2 Investment in Trading and Available-for-Sale Securities

a. 2019 entries
Investment in trading securities 500,000
Cash 500,000

Investment in trading securities 20,000
Gains on trading securities (income) 20,000

2020 entries
Cash 525,000
Investment in trading securities 520,000
Gains on trading securities (income) 5,000

Investment in trading securities 700,000
Cash 700,000

Losses on trading securities (income) 100,000
Investment in trading securities 100,000