Related questions with answers

Aykroyd Corp. was a 30% owner of Martin Company, holding 210,000 shares of Martin's common stock on December 31, 2019. The investment account had the following entries.

Investment in Martin\begin{array}{c} \hspace{90pt}\textbf{Investment in Martin}\\ \end{array}

1/1/18 Cost$3,180,00012/6/18 Dividend received$150,00012/31/18: Share of income390,00012/5/19 Dividend received240,00012/31/19 Share of income510,000\begin{array}{llrr|lllr} \hline \text{1/1/18 Cost}&&\text{}&\text{\$3,180,000}\hspace{10pt}&\text{12/6/18 Dividend received}&&\text{}&\text{\$150,000}\\ \text{12/31/18: Share of income}&&\text{}&\text{390,000}\hspace{10pt}&\text{12/5/19 Dividend received}&&\text{}&\text{240,000}\\ \text{12/31/19 Share of income}&&\text{}&\text{510,000}\hspace{10pt}&\text{}&&\text{}&\text{}\\ \end{array}

On January 2, 2020, Aykroyd sold 126,000 shares of Martin for $3,440,000, thereby losing its significant influence. During the year 2020, Martin experienced the following results of operations and paid the following dividends to Aykroyd.

MartinDividends PaidIncome (Loss)to Aykroyd2020$300,000$50,400\begin{array}{cccc} &{\hspace{5pt}\text{Martin}\hspace{5pt}}&{\hspace{2pt}\text{Dividends Paid}\hspace{2pt}}\\ &\underline{\hspace{10pt}\text{Income (Loss)}\hspace{10pt}}&\underline{\hspace{2pt}\text{to Aykroyd}\hspace{2pt}}\\ \text{2020}&\$300,000&\$50,400\\ \end{array}

At December 31, 2020, the fair value of Martin shares held by Aykroyd is $1,570,000. This is the first reporting date since the January 2 sale.


a. What effect does the January 2, 2020, 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, 2020 (prior to any fair value adjustment).

c. Prepare the adjusting entry on December 31, 2020, applying the fair value method to Aykroyd's long-term investment in Martin Company securities.

The trial balance of Customer Choice Wholesale Company contained the accounts shown at December 31, the end of the company’s fiscal year.

CUSTOMER CHOICE WHOLESALE COMPANYTrial BalanceDecember 31, 2014\begin{array}{c} \textbf{CUSTOMER CHOICE WHOLESALE COMPANY}\\ \textbf{Trial Balance}\\ \textbf{December 31, 2014}\\ \end{array}

DebitCreditCash$31,400Accounts Receivable37,600Inventory70,000Land92,000Buildings200,000Accumulated Depreciation—Buildings$60,000Equipment83,500Accumulated Depreciation—Equipment40,500Notes Payable54,700Accounts Payable17,500Common Stock160,000Retained Earnings67,200Dividends10,000Sales Revenue922,100Sales Discounts6,000Cost of Goods Sold709,900Salaries and Wages Expense51,300Utilities Expense11,400Maintenance and Repairs Expense8,900Advertising Expense5,200Insurance Expense4,800$1,322,000$1,322,000\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{17pt}31,400}\\ \text{Accounts Receivable}&\text{\hspace{22pt}37,600}\\ \text{Inventory}&\text{\hspace{22pt}70,000}\\ \text{Land}&\text{\hspace{22pt}92,000}\\ \text{Buildings}&\text{\hspace{17pt}200,000}\\ \text{Accumulated Depreciation—Buildings}&&\text{\$\hspace{17pt}60,000}\\ \text{Equipment}&\text{\hspace{22pt}83,500}\\ \text{Accumulated Depreciation—Equipment}&&\text{\hspace{22pt}40,500}\\ \text{Notes Payable}&&\text{\hspace{22pt}54,700}\\ \text{Accounts Payable}&&\text{\hspace{22pt}17,500}\\ \text{Common Stock}&&\text{\hspace{17pt}160,000}\\ \text{Retained Earnings}&&\text{\hspace{22pt}67,200}\\ \text{Dividends}&\text{\hspace{22pt}10,000}\\ \text{Sales Revenue}&&\text{\hspace{17pt}922,100}\\ \text{Sales Discounts}&\text{\hspace{27pt}6,000}\\ \text{Cost of Goods Sold}&\text{\hspace{17pt}709,900}\\ \text{Salaries and Wages Expense}&\text{\hspace{22pt}51,300}\\ \text{Utilities Expense}&\text{\hspace{22pt}11,400}\\ \text{Maintenance and Repairs Expense}&\text{\hspace{27pt}8,900}\\ \text{Advertising Expense}&\text{\hspace{27pt}5,200}\\ \text{Insurance Expense}&\underline{\text{\hspace{27pt}4,800}}&\underline{\hspace{50pt}}\\ &\underline{\underline{\text{\$\hspace{1pt}}1,322,000}}&\underline{\underline{\text{\$\hspace{1pt}}1,322,000}}\\ \end{array}

Adjustment data:

 1. Depreciation is $8,000 on buildings and$7,000 on equipment. (Both are operating expenses.)
 2. Interest of $4,500 is due and unpaid on notes payable at December 31.
 3. Income tax due and unpaid at December 31 is$24,000.

Other data: $15,000 of the notes payable are payable next year.


(d) Prepare a multiple-step income statement and a retained earnings statement for the year, and a classified balance sheet at December 31, 2014.

Castleman Holdings, Inc. had the following equity investment portfolio at January 1, 2017.

Evers Company1,000 shares @ $15 each$15,000Rogers Company900 shares @ $20 each18,000Chance Company500 shares @ $9 each4,500Equity investments @ cost37,500Fair value adjustment(7,500)Equity investments @ fair value$30,000\begin{array}{llr} \text{Evers Company}&\text{1,000 shares @ \$15 each}\hspace{25pt}&\text{\$\hspace{5pt}15,000}\hspace{4pt}\\ \text{Rogers Company}&\text{900 shares @ \$20 each}&\text{18,000}\hspace{4pt}\\ \text{Chance Company}&\text{500 shares @ \$9 each}&\underline{\text{\hspace{15pt}4,500}}\hspace{4pt}\\ \text{Equity investments @ cost}&&\text{37,500}\hspace{4pt}\\ \text{Fair value adjustment}&&\underline{\text{\hspace{15pt}(7,500}})\\ \text{Equity investments @ fair value}&&\underline{\underline{\$\text{\hspace{9pt}30,000}}}\hspace{4pt}\\ \end{array}

During 2017, the following transactions took place.

  1. On March 1, Rogers Company paid a $2 per share dividend.
  2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company for$11 per share.
  3. On May 15, Castleman Holdings, Inc. purchased 100 more shares of Evers Company stock at $16 per share.
  4. At December 31, 2017, the stocks had the following price per share values: Evers$17, Rogers $19, and Chance$8.

During 2018, the following transactions took place. 5. On February 1, Castleman Holdings, Inc. sold the remaining Chance shares for $8 per share. 6. On March 1, Rogers Company paid a$2 per share dividend. 7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month. 8. At December 31, 2018, the stocks had the following price per share values: Evers$19 and Rogers $21.


  • a. Prepare journal entries for each of the above transactions.
  • b. Prepare a partial balance sheet showing the investment-related amounts to be reported at December 31, 2017 and 2018.

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

WATSON ANVILSUnadjusted Trial BalanceDecember 31, 2018\begin{array}{c} \textbf{WATSON ANVILS}\\ \textbf{Unadjusted Trial Balance}\\ \textbf{December 31, 2018} \end{array}

Account TitleDebitCreditCash$13,560Accounts Receivable17,000Prepaid Rent2,140Office Supplies2,800Equipment30,000Accumulated Depreciation-Equipment$11,000Accounts Payable7,200Salaries PayableUnearned Revenue5,600Common Stock12,000Retained Earnings17,600Dividends4,600Service Revenue19,000Salaries Expense2,300Rent ExpenseDepreciation Expense-EquipmentSupplies Expense Total$72,400$72,400\begin{array}{lrr} {\textbf{Account Title}}&\textbf{Debit\hspace{6pt}}&\textbf{Credit\hspace{4pt}}\\ \text{Cash}&\text{\$\hspace{5pt}13,560}\\ \text{Accounts Receivable}\hspace{10pt}&\text{17,000}\\ \text{Prepaid Rent}&\text{2,140}\\ \text{Office Supplies}&\text{2,800}\\ \text{Equipment}&\text{30,000}\\ \text{Accumulated Depreciation-Equipment}&&\text{\$\hspace{5pt}11,000}\\ \text{Accounts Payable}&&\text{7,200}\\ \text{Salaries Payable}&&\text{}\\ \text{Unearned Revenue}&&\text{5,600}\\ \text{Common Stock}&&\text{12,000}\\ \text{Retained Earnings}&&\text{17,600}\\ \text{Dividends}&\text{4,600}\\ \text{Service Revenue}&&\text{19,000}\\ \text{Salaries Expense}&\text{2,300}\\ \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{72,400}}}&\underline{\underline{\$\hspace{5pt}\text{72,400}}}\\ \end{array}

Adjustment data: a. Unearned Revenue still unearned at December 31, $3,600. b. Prepaid Rent still in force at December 31,$2,000. c. Office Supplies used, $600. d. Depreciation,$400. e. Accrued Salaries Expense at December 31, $180.


  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.


Answered 1 year ago
Answered 1 year ago
Step 1
1 of 31

Requirement 1

Let us open the T accounts using the balances in the unadjusted trial balance.

CashBeg. bal$13,560\def\arraystretch{1.5} \begin{array}{c} \textbf{Cash}\\ \begin{array}{lr|lr} \hline \text{Beg. bal}& \$13,560& \\ &&\\ \end{array} \end{array}

Accounts ReceivableBeg. bal$17,000\def\arraystretch{1.5} \begin{array}{c} \textbf{Accounts Receivable}\\ \begin{array}{lr|lr} \hline \text{Beg. bal}& \$17,000& \\ &&\\ \end{array} \end{array}

Prepaid RentBeg. bal$2,140\def\arraystretch{1.5} \begin{array}{c} \textbf{Prepaid Rent}\\ \begin{array}{lr|lr} \hline \text{Beg. bal}& \$2,140& \\ &&\\ \end{array} \end{array}

Office SuppliesBeg. bal$2,800\def\arraystretch{1.5} \begin{array}{c} \textbf{Office Supplies}\\ \begin{array}{lr|lr} \hline \text{Beg. bal}& \$2,800& \\ &&\\ \end{array} \end{array}

EquipmentBeg. bal$26,000\def\arraystretch{1.5} \begin{array}{c} \textbf{Equipment}\\ \begin{array}{lr|lr} \hline \text{Beg. bal}& \$26,000& \\ &&\\ \end{array} \end{array}

Create an account to view solutions

Create an account to view solutions

More related questions