Park Co.’s long-term available-for-sale portfolio at December 31, 2010, consists of the following.

Available-for-Sale Securities	Cost	Fair Value
80,000 shares of Company A common stock	$1,070,600	$ 980,000
14,000 shares of Company B common stock	318,750	308,000
35,000 shares of Company C common stock	1,325,500	1,281,875

Park enters into the following long-term investment transactions during year 2011.

Jan. 29 Sold 7,000 shares of Company B common stock for $158,375 less a brokerage fee of$3,100.
Apr. 17 Purchased 20,000 shares of Company W common stock for $395,000 plus a brokerage fee of$3,500. The shares represent a 30% ownership in Company W.
July 6 Purchased 9,000 shares of Company X common stock for $253,125 plus a brokerage fee of$3,500. The shares represent a 10% ownership in Company X.
Aug. 22 Purchased 100,000 shares of Company Y common stock for $750,000 plus a brokerage fee of$8,200. The shares represent a 51% ownership in Company Y.
Nov. 13 Purchased 17,000 shares of Company Z common stock for $533,800 plus a brokerage fee of$6,900. The shares represent a 5% ownership in Company Z.
Dec. 9 Sold 80,000 shares of Company A common stock for $1,030,000 less a brokerage fee of$4,100.

The fair values of its investments at December 31, 2011, are: B, $162,750; C,$1,220,625; W, $382,500; X,$236,250; Y, $1,062,500; and Z,$557,600.

Required
1. Calculate the amount Park should report on its December 31, 2011, balance sheet for its long-term investments in available-for-sale securities.
2. Prepare any necessary December 31, 2011, adjusting entry to record the fair value adjustment for the long-term investments in available-for-sale securities.
3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities should Park report on its December 31, 2011, income statement?

Troy’s long-term available-for-sale portfolio at the start of this year consists of the following.

Troy enters into the following transactions involving its available-for-sale debt securities this year.

Jan. 13    Sold one-fourth of the Company S notes for $72,250.

Apr. 5     Purchased Company V bonds for$133,875.

Sep. 2     Sold all of the Company T bonds for $156,750.

Oct. 30   Purchased Company X notes for$48,750.

The fair values at December 31 are R, $568,125; S,$234,345; V, $134,940; and X,$45,625.

Required

1. Prepare journal entries to record these transactions, including any necessary December 31 adjusting entry to record the fair value adjustment of the long-term investments in available-for-sale securities.

2. Determine the amount Troy reports on its December 31 balance sheet for its long-term investments in available-for-sale securities.

3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities does Troy report on its income statement for this year?

The partnership of Matteson, Richton, and O’Toole has existed for a number of years. Currently, the partners have the following capital balances and profit and loss sharing percentages:

O’Toole elects to withdraw from the partnership, leaving Matteson and Richton to operate the business. Following the original partnership agreement, when a partner withdraws, the partnership and all of its individual assets are to be reassessed to current fair values by an independent appraiser. The withdrawing partner will receive cash or other assets equal to that partner’s current capital balance after including an appropriate share of any adjustment indicated by the appraisal. Gains and losses indicated by the appraisal are allocated using the regular profit and loss percentages.
 An independent appraiser is hired and estimates that the partnership as a whole is worth$600,000. Regarding the individual assets, the appraiser finds that a building with a book value of $180,000 has a fair value of$220,000. The book values for all other identifiable assets and liabilities are the same as their appraised fair values.
 Accordingly, the partnership agrees to pay O’Toole $120,000 upon withdrawal. Matteson and Richton, however, do not wish to record any goodwill in connection with the change in ownership.

Prepare the journal entry to record O’Toole’s withdrawal from the partnership.

The unadjusted trial balance of Walton Anvils at December 31, 2018, and the data for the adjustments follow:

$$\begin{array}{c} \textbf{WALTON ANVILS}\\ \textbf{Unadjusted Trial Balance}\\ \textbf{December 31, 2018} \end{array}$$

$$\begin{array}{lrr} {\textbf{Account Title}}&\textbf{Debit\hspace{6pt}}&\textbf{Credit\hspace{4pt}}\\ \text{Cash}&\text{\$\hspace{5pt}13,480}\\ \text{Accounts Receivable}\hspace{10pt}&\text{14,500}\\ \text{Prepaid Rent}&\text{2,320}\\ \text{Office Supplies}&\text{1,700}\\ \text{Equipment}&\text{23,000}\\ \text{Accumulated Depreciation-Equipment}&&\text{\$\hspace{10pt}1,000}\\ \text{Accounts Payable}&&\text{7,100}\\ \text{Salaries Payable}&&\text{}\\ \text{Unearned Revenue}&&\text{6,000}\\ \text{Common Stock}&&\text{24,000}\\ \text{Retained Earnings}&&\text{4,500}\\ \text{Dividends}&\text{4,600}\\ \text{Service Revenue}&&\text{19,500}\\ \text{Salaries Expense}&\text{2,500}\\ \text{Rent Expense}&\text{}\\ \text{Depreciation Expense-Equipment}&\text{}\\ \text{Supplies Expense }&\text{\underline{\hspace{38pt}}}&\text{\underline{\hspace{38pt}}}\\ \text{Total}&\underline{\underline{\$\hspace{5pt}\text{62,100}}}&\underline{\underline{\$\hspace{5pt}\text{62,100}}}\\ \end{array}$$

Adjustment data:

• a. Unearned Revenue still unearned at December 31, $1,800.
• b. Prepaid Rent still in force at December 31,$2,100.
• c. Office Supplies used, $1,500.
• d. Depreciation,$390.
• e. Accrued Salaries Expense at December 31, $200.

Requirements

1. Open the T-accounts using the balances in the unadjusted trial balance.
2. Complete the worksheet for the year ended December 31, 2018 (optional).
3. Prepare the adjusting entries, and post to the accounts.
4. Prepare an adjusted trial balance.
5. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form.
6. Prepare the closing entries, and post to the accounts.
7. Prepare a post-closing trial balance.
8. Calculate the current ratio for the company.

Dan Aykroyd Corp. was a 30% owner of Steve Martin Company, holding 210,000 shares of Martin’s common stock on December 31, 2016. The investment account had the following entries.

$$\begin{array}{ c } \hspace{0pt}\textbf{Investment in Martin} \end{array}\\$$

$$\begin{array} {r|l}\hline \hspace{0pt}\text{\hspace{10pt}1/ 1 /15 Cost}\hspace{69pt} \text{\$\hspace{2pt}3,180,000}& \text{{12/6/15 Dividend received}}{\hspace{25pt}\text{\$\hspace{2pt}150,000}\hspace{5pt}}\\ \hspace{5pt}\text{12/31/15 Share of income}\hspace{35pt} \text{390,000}& \text{{12/5/16 Dividend received}}{\hspace{25pt}\text{\hspace{7pt}240,000}\hspace{5pt}}\\ \hspace{5pt}\text{12/31/16 Share of income}\hspace{35pt} \text{510,000}& \end{array}$$

On January 2, 2017, Aykroyd sold 126,000 shares of Martin for $3,440,000, thereby losing its significant influence. During the year 2017, Martin experienced the following results of operations and paid the following dividends to Aykroyd.

$$\begin{array}{lcc} &\text{Martin}&\text{Dividends Paid}\\ &\text{\underline{Income (Loss)}}&\text{\underline{to Aykroyd}} \\ \text{2017}\hspace{15pt}&\text{\$\hspace{5pt}300,000}&\text{\$\hspace{5pt}50,400}\\ \end{array}$$

At December 31, 2017, the fair value of Martin shares held by Aykroyd is $1,570,000. This is the first reporting date since the January 2 sale.

Instructions

• a. What effect does the January 2, 2017, transaction have upon Aykroyd’s accounting treatment for its investment in Martin?
• b. Compute the carrying amount of the investment in Martin as of December 31, 2017 (prior to any fair value adjustment).
• c. Prepare the adjusting entry on December 31, 2017, applying the fair value method to Aykroyd’s long-term investment in Martin Company securities.

The unadjusted trial balance Fleming Investment Advisers at December 31, 2018, follows:

$$\begin{array}{c} \textbf{FLEMING INVESTMENT ADVISERS}\\ \textbf{Unadjusted Trial Balance}\\ \textbf{December 31, 2018} \end{array}$$

$$\begin{array}{lrr} {\textbf{Account Title}}&\textbf{Debit\hspace{6pt}}&\textbf{Credit\hspace{4pt}}\\ \text{Cash}&\text{\$\hspace{8pt}25,000}\\ \text{Accounts Receivable}\hspace{10pt}&\text{51,000}\\ \text{Office Supplies}&\text{7,500}\\ \text{Equipment}&\text{26,000}\\ \text{Accumulated Depreciation-Equipment}&&\text{\$\hspace{7pt}19,000}\\ \text{Accounts Payable}&&\text{14,000}\\ \text{Salaries Payable}&&\text{}\\ \text{Unearned Revenue}&&\text{4,500}\\ \text{Notes Payable (long-term)}&&\text{26,000}\\ \text{Common Stock}&&\text{15,000}\\ \text{Retained Earnings}&&\text{5,500}\\ \text{Dividends}&\text{28,000}\\ \text{Service Revenue}&&\text{99,000}\\ \text{Insurance Expense}&\text{2,500}\\ \text{Salaries Expense}&\text{33,000}\\ \text{Supplies Expense}&\text{}\\ \text{Interest Expense}&\text{3,000}\\ \text{Rent Expense}&\text{7,000}\\ \text{Depreciation Expense-Equipment}&\text{\underline{\hspace{40pt}}}&\text{\underline{\hspace{40pt}}}\\ \text{Total}&\underline{\underline{\$\hspace{2pt}\text{183,000}}}&\underline{\underline{\$\hspace{2pt}\text{183,000}}}\\ \end{array}$$

Adjustment data at December 31, 2018:

• a. Unearned Revenue earned during the year, $700.
• b. Office Supplies on hand,$3,000.
• c. Depreciation for the year, $3,000.
• d. Accrued Salaries Expense,$4,500.
• e. Accrued Service Revenue, $9,000.

Requirements

1. Prepare a worksheet for Fleming Investment Advisers at December 31, 2018.
2. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in account format.
3. Prepare closing entries.

Zeus Investments Inc. is a regional investment company that began operations on January 1, 2014. The following transactions relate to trading securities acquired by Zeus Investments Inc., which has a fiscal year ending on December 31:

2014 Feb.  14.   Purchased 4,800 shares of Apollo Inc. as a trading security at $26 per share plus a brokerage commission of$192.

Apr.    1.   Purchased 2,300 shares of Ares Inc. as a trading security at $19 per share plus a brokerage commission of$92.

June   1.   Sold 600 shares of Apollo Inc. for $32 per share less a$100 brokerage commission.

        27.   Received an annual dividend of $0.20 per share on Apollo Inc. stock.

Dec. 31.   The portfolio of trading securities was adjusted to fair values of$33 and $18.50 per share for Apollo Inc. and Ares Inc., respectively.

2015 Mar. 14.   Purchased 1,200 shares of Athena Inc. as a trading security at$65 per share plus a $120 brokerage commission.

June 26.   Received an annual dividend of$0.21 per share on Apollo Inc. stock.

July  30.   Sold 480 shares of Athena Inc. for $60 per share less a$50 brokerage commission.

Dec. 31.   The portfolio of trading securities had a cost of $200,032 and a fair value of$188,000, requiring a credit balance in Valuation Allowance for Trading Investments of $12,032 ($200,032 2 $188,000). Thus, the debit balance from December 31, 2014, is to be adjusted to the new balance.

Instructions

1. Journalize the entries to record these transactions.
2. Prepare the investment-related current asset balance sheet presentation for Zeus Investments Inc. on December 31, 2015.
3. How are unrealized gains or losses on trading investments presented in the financial statements of Zeus Investments Inc.?

Jobim Inc. had the following condensed balance sheet at the end of operations for 2019.

$$\begin{array}{c} \hline \hspace{170pt}\textbf{Jobim Inc. }\hspace{170pt}\\ \textbf{Balance Sheet}\\ \textbf{December 31, 2019 }\\ \hline \end{array}$$

$$\begin{array}{lrrllrrr} \text{Cash}&&\$8,500&\hspace{10pt}&\text{Current liabilities}&&\$15,000\\ \text{Current assets other than cash}&&29,000&\hspace{10pt}&\text{Long-term notes payable}&&25,500\\ \text{Equity investments }&&20,000&\hspace{10pt}&\text{Bonds payable}&&{\hspace{10pt}{25,000}}\\ \text{Plant assets (net)}&&67,500&\hspace{10pt}&\text{Common stock}&&75,000\\ \text{Land}&&\underline{\hspace{15pt}\text{40,000}}&\hspace{10pt}&\text{Retained earnings}&&\underline{\hspace{15pt}\text{24,500}}\\ \text{}&&\underline{\underline{\$\hspace{5pt}\text{165,000}}}&\hspace{10pt}&\text{}&&\underline{\underline{\$\hspace{5pt}\text{165,000}}}\\\\ \hline \end{array}$$

During 2020, the following occurred.

1. A tract of land was purchased for $9,000.

2. Bonds payable in the amount of$15,000 were redeemed at par.

3. An additional $10,000 in common stock was issued at par.

4. Dividends totaling$9,375 were paid to stockholders.

5. Net income was $35,250 after allowing depreciation of$13,500.

6. Land was purchased through the issuance of $22,500 in bonds.

7. Jobim Inc. sold part of its investment portfolio for$12,875. This transaction resulted in a gain of $2,000 for the company. No unrealized gains or losses were recorded on these investments in 2020.

8. Both current assets (other than cash) and current liabilities remained at the same amount.

Instructions

a. Prepare a statement of cash flows for 2020 using the indirect method.

b. Prepare the condensed balance sheet for Jobim Inc. as it would appear at December 31, 2020.

On December 1, 2014, Harrisen Company had the account balances shown below.

$$\begin{array}{lclc} &\underline{\textbf{Debit}}&&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{5pt}4,800}&\text{Accumulated Depreciation—Equipment}&\text{\$\hspace{5pt}1,500}\\ \text{Accounts Receivable}&\text{\hspace{10pt}3,900}&\text{Accounts Payable}&\text{\hspace{10pt}3,000}\\ \text{Inventory}&\text{\hspace{5pt}1,800*}&\text{Common Stock}&\text{\hspace{5pt}10,000}\\ \text{Equipment}&\underline{\text{\hspace{5pt}21,000}}&\text{Retained Earnings}&\underline{\text{\hspace{5pt}17,000}}\\ &\underline{\underline{\text{\$\hspace{1pt}31,500}}}&&\underline{\underline{\text{\$\hspace{1pt}31,500}}}\\ \end{array}$$

*(3,000 x $0.60)

The following transactions occurred during December.

Dec.  3 Purchased 4,000 units of inventory on account at a cost of$0.72 per unit.
      5 Sold 4,400 units of inventory on account for $0.90 per unit. (It sold 3,000 of the$0.60 units and 1,400 of the $0.72.)
      7 Granted the December 5 customer$180 credit for 200 units of inventory returned costing $150. These units were returned to inventory.
     17 Purchased 2,200 units of inventory for cash at$0.80 each.
     22 Sold 2,000 units of inventory on account for $0.95 per unit. (It sold 2,000 of the$0.72 units.)

Adjustment data:

1. Accrued salaries and wages payable $400.
2. Depreciation on equipment$200 per month.
3. Income tax expense was $215, to be paid next year.

Instructions

(a) Journalize the December transactions and adjusting entries, assuming Harrisen uses the perpetual inventory method.

(b) Enter the December 1 balances in the ledger T-accounts and post the December transactions. In addition to the accounts mentioned above, use the following additional accounts: Income Taxes Payable, Salaries and Wages Payable, Sales Revenue, Sales Returns and Allowances, Cost of Goods Sold, Depreciation Expense, Salaries and Wages Expense, and Income Tax Expense.

Seligman programmed his personal computer to simulate the game of roulette. Roulette involves a wheel with its rim divided into 38 pockets. Thirty-six of the pockets are numbered 1 to 36 and are alternately colored red and black. The two remaining pockets are colored green and are marked 0 and 00. To play the game, you bet a certain amount of money on one or more pockets. The wheel is spun and turns until it stops. If you have money on that number, you win a specified amount. For example, if you were to play the number 20, the payoff is 35 to 1. If the wheel does not stop at that number, you lose your bet. Selgiman decided to see how his nightly gains (or losses) would fare if he were to bet $5 on each turn of the wheel and repeat the process 200 times each night. He did this 365 times, thereby simulating the outcomes of 365 nights at the casino. Nor surprisingly, the mean "gain" per$1000 evening for the 365 nights was a loss of $55, the average of the winnings retained by the gambling house. The surprise, according to Seligman, was the extreme variability of the nightly "winnings." Seven times out of the 365 evenings, the fictitious gambler lost the$1000 stake, and only once did he win a maximum of $1160. Evaluate the probability of 7 out of 365 evenings resulting in a loss of the total$1000 stake.

Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by Rios Financial Co., which has a fiscal year ending on December 31:

Year 1

Feb. 1. Purchased 7,500 shares of Caldwell Inc. as a trading security at $50 per share plus a brokerage commission of$75.

May 1. Purchased 3,000 shares of Holland Inc. as a trading security at $42 plus a brokerage commission of$90.

July 1. Sold 4,500 shares of Caldwell Inc. for $46 per share less a$110 brokerage commission.

31. Received an annual dividend of $0.50 per share on Caldwell Inc. stock.

Dec. 31. The portfolio of trading securities was adjusted to fair values of$47 and $40 per share for Caldwell Inc. and Holland Inc., respectively.

Year 2

Apr. 1. Purchased 5,000 shares of Fuller Inc. as a trading security at$25 per share plus a $100 brokerage commission.

July 31. Received an annual dividend of$0.52 per share on Caldwell Inc. stock.

Oct. 14. Sold 1,000 shares of Fuller Inc. for $28 per share less a$110 brokerage commission.

Dec. 31. The portfolio of trading securities had a cost of $376,200 and a fair value of$420,000, requiring a debit balance in Valuation Allowance for Trading Investments of $43,800 ($420,000 2 $376,200). Thus, the credit balance from December 31, Year 1, is to be adjusted to the new balance.

Instructions

1. Journalize the entries to record these transactions.
2. Prepare the investment-related current asset balance sheet presentation for Rios Financial Co. on December 31, Year 2.
3. How are unrealized gains or losses on trading investments presented in the financial statements of Rios Financial Co.?

Seligman programmed his personal computer to simulate the game of roulette. Roulette involves a wheel with its rim divided into 38 pockets. Thirty-six of the pockets are numbered 1 to 36 and are alternately colored red and black. The two remaining pockets are colored green and are marked 0 and 00. To play the game, you bet a certain amount of money on one or more pockets. The wheel is spun and turns until it stops. If you have money on that number, you win a specified amount. For example, if you were to play the number 20, the payoff is 35 to 1. If the wheel does not stop at that number, you lose your bet. Selgiman decided to see how his nightly gains (or losses) would fare if he were to bet $5 on each turn of the wheel and repeat the process 200 times each night. He did this 365 times, thereby simulating the outcomes of 365 nights at the casino. Nor surprisingly, the mean "gain" per$1000 evening for the 365 nights was a loss of $55, the average of the winnings retained by the gambling house. The surprise, according to Seligman, was the extreme variability of the nightly "winnings." Seven times out of the 365 evenings, the fictitious gambler lost the$1000 stake, and only once did he win a maximum of $1160. Evaluate the probability that the largest evening's winnings were as great as$1160.

Apple Inc., is one of the most successful enterprises of all time. Its computers, tablets, phones, and watches are all highly desired by consumers, and the company's product innovations keep arriving at a steady pace. Apple's financial success can also be attributed to its supply chain management and to its management of its income taxes. Historically, U.S. income taxes have been based on payments from Apple's international subsidiaries, so the company (and many others) could defer the payment of taxes by retaining profits in its international subsidiaries and investing in relatively safe, liquid financial assets. As a result, Apple's balance sheet reports substantial investments in marketable securities, as shown in the following:

The following information is taken from the company's fiscal 2018 income statement and footnotes:

Finally, the following table is taken from Note 2 of Apple's 2018 10-K annual report. The reported numbers are slightly higher than those reported from Apple's balance sheet above because some AFS securities are classified as cash equivalents on the balance sheet, rather than marketable securities.

Fixed-income (debt) investments-AFS:

From its balance sheet, it would appear that a significant portion of Apple's resources are devoted to investing in financial instruments. Calculate the after-tax return to Apple's financial assets. Apple's Statement of Other Comprehensive Income reports an after-tax unrealized

The unadjusted trial balance of Farish Investment Advisers at December 31, 2018, follows:

$$\begin{array}{c} \textbf{FARISH INVESTMENT ADVISERS}\\ \textbf{Unadjusted Trial Balance}\\ \textbf{December 31, 2018} \end{array}$$

$$\begin{array}{lrr} {\textbf{Account Title}}&\textbf{Debit\hspace{6pt}}&\textbf{Credit\hspace{4pt}}\\ \text{Cash}&\text{\$\hspace{8pt}30,000}\\ \text{Accounts Receivable}\hspace{10pt}&\text{51,000}\\ \text{Office Supplies}&\text{7,000}\\ \text{Equipment}&\text{28,000}\\ \text{Accumulated Depreciation-Equipment}&&\text{\$\hspace{12pt}9,000}\\ \text{Accounts Payable}&&\text{13,000}\\ \text{Salaries Payable}&&\text{}\\ \text{Unearned Revenue}&&\text{5,500}\\ \text{Notes Payable (long-term)}&&\text{21,000}\\ \text{Common Stock}&&\text{27,000}\\ \text{Retained Earnings}&&\text{29,500}\\ \text{Dividends}&\text{29,000}\\ \text{Service Revenue}&&\text{93,000}\\ \text{Insurance Expense}&\text{2,500}\\ \text{Salaries Expense}&\text{40,000}\\ \text{Supplies Expense}&\text{}\\ \text{Interest Expense}&\text{5,500}\\ \text{Rent Expense}&\text{5,000}\\ \text{Depreciation Expense-Equipment }&\text{\underline{\hspace{40pt}}}&\text{\underline{\hspace{40pt}}}\\ \text{Total}&\underline{\underline{\$\hspace{2pt}\text{198,000}}}&\underline{\underline{\$\hspace{2pt}\text{198,000}}}\\ \end{array}$$

Adjustment data at December 31, 2018:

• a. Unearned Revenue earned during the year, $800.
• b. Office Supplies on hand,$4,500.
• c. Depreciation for the year, $4,500.
• d. Accrued Salaries Expense,$5,000.
• e. Accrued Service Revenue, $6,500.

Requirements

1. Prepare a worksheet for Farish Investment Advisers at December 31, 2018.
2. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in account format.
3. Prepare closing entries.