Chapter 13: 12Q (page 658)
Identify and explain the different types of classifications for investments in equity securities.
Equity Securities have three types of investment. These are:
a. Holding less than 20% shares
b. Holding between 20% to 50% shares
c. Holding more than 50% shares
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Question:Adriana Co., with annual net sales of $5 million, maintains a markup of 25% based on cost. Adriana’s expenses average 15% of net sales. What is Adriana’s gross profit and net profit in dollars?
E13-5 (L01) (Adjusting Entry for Sales Tax) During the month of June, Rowling Boutique recorded cash sales of \(233,200 and credit sales of \)153,700, both of which include the 6% sales tax that must be remitted to the state by July 15.
Instructions
Prepare the adjusting entries that should be recorded to fairly present the June 30 financial statements.
Explain the accounting for a service-type warranty.
How are current liabilities related by definition to current assets? How are current liabilities related to a company’s operating cycle?
(Gain on Sale of Investments and Comprehensive Income) On January 1, 2017, Acker Inc. had the followingbalance sheet.
The accumulated other comprehensive income related to unrealized holding gains on available-for-sale debt securities. The fairvalue of Acker Inc.’s available-for-sale debt securities at December 31, 2017, was \(190,000; its cost was \)140,000. No securities
were purchased during the year. Acker Inc.’s income statement for 2017 was as follows. (Ignore income taxes.)
ACKER INC.
BALANCE SHEET
AS OF JANUARY 1, 2017
Assets Equity
Cash \( 50,000 Common stock \)260,000
Debt investments (available-for-sale) 240,000 Accumulated other comprehensive income 30,000
Total \(290,000 Total \)290,000
ACKER INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2017
Dividend revenue \( 5,000
Gain on sale of investments 30,000
Net income \)35,000
Instructions
(Assume all transactions during the year were for cash.)
(a) Prepare the journal entry to record the sale of the available-for-sale debt securities in 2017.
(b) Prepare the journal entry to record the Unrealized Holding Gain or Loss for 2017.
(c) Prepare a statement of comprehensive income for 2017.
(d) Prepare a balance sheet as of December 31, 2017.
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