BE17-7 Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. his in!

est"ent en-
a#$es Zoop to e%ert si&nificant inf$uence o!er Murphy. 'urin& the year Murphy earned net inco"e of
$1(0,000 and paid di!idends of $)0,000. *repare Zoop+s ,ourna$ entries re$ated to this in!est"ent.
BE17-) -se the infor"ation fro" BE17-. #ut assu"e the stoc/ 0as purchased as a tradin& security.
*repare 1air#an/s+s ,ourna$ entries to record 2a3 the purchase of the in!est"ent, 2#3 the di!idends
recei!ed, and 2c3 the fair !a$ue ad,ust"ent.
BE17-. 1air#an/s Corporation purchased 400 shares of 5her"an Inc. co""on stoc/ as an a!ai$a#$e-
for-sa$e in!est"ent for $13,600. 'urin& the year, 5her"an paid a cash di!idend of $3.6. per share. 7t
yearend, 5her"an stoc/ 0as se$$in& for $34..0 per share. *repare 1air#an/s+s ,ourna$ entries to record
2a3 the purchase of the in!est"ent, 2#3 the di!idends recei!ed, and 2c3 the fair !a$ue ad,ust"ent.
BE17-10 8i$$s#orou&h Co. has an a!ai$a#$e-for-sa$e in!est"ent in the #onds of 5chuy$er Corp. 0ith a
carryin& 2and fair3 !a$ue of $70,000. 8i$$s#orou&h deter"ined that due to poor econo"ic prospects for
5chuy$er, the #onds ha!e decreased in !a$ue to $)0,000. It is deter"ined that this $oss in !a$ue is other-
than-te"porary. *repare the ,ourna$ entry, if any, to record the reduction in !a$ue.
E17-1 2In!est"ent C$assifications3 1or the fo$$o0in& in!est"ents identify 0hether they are9
1. radin& 5ecurities
6. 7!ai$a#$e-for-5a$e 5ecurities
3. 8e$d-to-Maturity 5ecurities
Each case is independent of the other.
2a3 7 #ond that 0i$$ "ature in 4 years 0as #ou&ht 1 "onth a&o 0hen the price dropped. 7s soon as
the !a$ue increases, 0hich is e%pected ne%t "onth, it 0i$$ #e so$d.
2#3 10% of the outstandin& stoc/ of 1ar"-Co 0as purchased. he co"pany is p$annin& on e!entua$$y
&ettin& a tota$ of 30% of its outstandin& stoc/.
2c3 10-year #onds 0ere purchased this year. he #onds "ature at the first of ne%t year.
2d3 Bonds that 0i$$ "ature in . years are purchased. he co"pany 0ou$d $i/e to ho$d the" unti$ they
"ature, #ut "oney has #een ti&ht recent$y and they "ay need to #e so$d.
2e3 7 #ond that "atures in 10 years 0as purchased. he co"pany is in!estin& "oney set aside for an
e%pansion pro,ect p$anned 10 years fro" no0.
2f3 *referred stoc/ 0as purchased for its constant di!idend. he co"pany is p$annin& to ho$d the pre-
ferred stoc/ for a $on& ti"e
*17-1 2'e#t 5ecurities3 *resented #e$o0 is an a"orti:ation schedu$e re$ated to 5pan&$er Co"pany+s
.-year, $100,000 #ond 0ith a 7% interest rate and a .% yie$d, purchased on 'ece"#er 31, 600(, for
$10(,))0.
'ate Cash Interest Bond *re"iu" Carryin& 7"ount
;ecei!ed ;e!enue 7"orti:ation of Bonds
16<31<0( $7,000 $.,433 $1,.)7 $10(,))0
16<31<0= 7,000 .,3.4 1,)4) 107,0=3
16<31<10 7,000 .,676 1,76( 10.,447
16<31<11 7,000 .,1() 1,(14 103,71=
16<31<16 7,000 .,0=. 1,=0. 101,=0.
16<31<13 100,000
he fo$$o0in& schedu$e presents a co"parison of the a"orti:ed cost and fair !a$ue of the #onds at year-
end.
16<31<0=
7"orti:ed cost
1air !a$ue
16<31<10 16<31<11 16<31<16 16<31<13
$107,0=3 $10.,447 $103,71= $101,=0. $100,000
$10),.00 $107,.00 $10.,).0 $103,000 $100,000
Instructions
2a3 *repare the ,ourna$ entry to record the purchase of these #onds on 'ece"#er 31, 600(, assu"in&
the #onds are c$assified as he$d-to-"aturity securities.
2#3 *repare the ,ourna$ entry2ies3 re$ated to the he$d-to-"aturity #onds for 600=.
2c3 *repare the ,ourna$ entry2ies3 re$ated to the he$d-to-"aturity #onds for 6011.
2d3 *repare the ,ourna$ entry2ies3 to record the purchase of these #onds, assu"in& they are c$assified
as a!ai$a#$e-for-sa$e.
2e3 *repare the ,ourna$ entry2ies3 re$ated to the a!ai$a#$e-for-sa$e #onds for 600=.
2f3 *repare the ,ourna$ entry2ies3 re$ated to the a!ai$a#$e-for-sa$e #onds for 6011.