Chapter 13: Q1Q (page 658)
Question: Distinguish between debt security and equity security.
Answer
Some of the differences between them are ownership, maturity date, type of return, voting right, and management participation.
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Why is the liabilities section of the balance sheet of primary significance to bankers?
What are compensated absences?
EXCEL (Equity Securities Entries and Disclosures) Parnevik Company has the following securities in its
investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,000 shares of Anderson Co. common
stock which cost
preferred stock which cost
In 2018, Parnevik completed the following securities transactions.
1. On January 15, sold 3,000 shares of Anderson’s common stock at
2. On April 17, purchased 1,000 shares of Castle’s common stock at
On December 31, 2018, the market prices per share of these securities were Munter
accounting supervisor of Parnevik told you that, even though all these securities have readily determinable fair values, Parnevik
will not actively trade these securities because the top management intends to hold them for more than one year.
Instructions
(a) Prepare the entry for the security sale on January 15, 2018.
(b) Prepare the journal entry to record the security purchase on April 17, 2018.
(c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2018.
(d) How should the unrealized gains or losses be reported on Parnevik’s income statement and balance sheet?
Explain the accounting for an assurance-type warranty.
Question: On February 1, 2018, one of the huge storage tanks of Viking Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2018 (When the December 31, 2017, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company is considered at fault, Viking Manufacturing will have to cover the damages from its own resources.InstructionsDiscuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2017.
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