University of Maryland, University College ACCOUNTING 221 Week 2 quiz

On January 1, 2017, Alpha Company purchased a significant influence shares investment in the Bravo-Zulu Company for $250,000. This investment balance represents 30% of the equity of the Bravo-Zulu Company. During 2017, Bravo-Zulu Company reported Net Income of $25,000 on November 15, 2017 Bravo-Zulu Company paid cash dividends of $10,000 to its shareholders. Use this information to prepare the January 1, November 15 and December 31, 2017 General Journal entry (without explanation.) If no entry is required, then write "No Entry Required."

General Journal:

Date Accounts Debit Credit 1/1/17 Investment in Bravo-Zulu Company 250,000 Cash 250,000 (To record acquire 30% of Bravo Zulu Co.) 11/15/17 Cash 3,000 Investment in Bravo Zulu Co. 3,000 (To record Dividends received 10,000*30%) 12/31/17 Investment in Bravo Zulu Company 7,500 Revenue from Investment in Bravo Zulu Co. 7,500 (To record net income share 25,000*30%)

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Answer:

General Journal:

Solution Notes:

Dividends: 30% x $10,000 = $3,000

Income: 30% x $25,000 = $7,500

GJ - 2

Question 2

14 / 14 points On January 2, 2017, Alpha Company purchased 15,000 shares of the stock of Zulu Company, and did not obtain significant influence. The investment is intended as a long- term investment. The stock was purchased for $12 per share, and represents a 15% ownership stake. Zulu Company made $25,000 of net income in 2017, and paid dividends of $10,000 on December 15, 2017. On December 31, 2017, Zulu Company's stock was trading on the open market for $11 per share at the end of the year. Use this information to prepare the General Journal entry(ies) (without explanation) for January 2 purchase and the December 15 & 31, 2017 record of income & gain/loss. If no entry is required then write "No Entry Required."

General Journal:

Date Accounts Debit Credit 1/2/17 Available for sale Securities 180,000 Cash 180,000 (To record Investment) 12/15/17 Cash 1,500 Dividend Income 1,500 (To record dividend revenue(10,000*15%)) 12/31/17 Unrealized Gain/Loss 15,000 Available for Sale Securities 15,000 (to record fair value adjustment (15,000*12-11))

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Answer:

General Journal:

Date Accounts Debit Credit

1/2/17 Available-for-Sale Securities 180,000 Cash 180,000

12/15/17 Cash ($10,000 x 15%) 1,500 Dividend Income 1,500

12/31/17 Unrealized Gain/Loss - OIC 15,000 Available-for-Sale Securities 15,000

Additional Notes:

Date Notes FMV 1/2/17 15,000 x $12 = $180,000 12/31/17 15,000 x $11 165,000 Unrealized Loss ($15,000)

GJ - 3

Question 3

• / 8 points

Alpha company signed a $100,000 mortgage on July 1, 2016 for the purchase of their new garage building. The mortgage entailed equal monthly payments of $2,500 at the end of each month. The interest rate is 1% per month. Use this information to prepare the General Journal entry (without explanation) for the August 31, 2016 monthly mortgage payment. If no entry is required then write "No Entry Required." (Round your answer to the nearest whole dollar.)

General Journal:

Date Accounts Debit Credit 8/31/2016 Loan Payable 1,515 Interest Expense 985 Cash 2,500

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Answer:

General Journal:

Date Accounts Debit Credit 8/31/16 Mortgage Payable 1,515 Interest Expense 985 Cash 2,500

Solution Notes:

$100,000 - ($2,500 - ($100,000 x 1%)) x 1% = $985

GJ - 4

Question 4

• / 8 points

On April 30, 2016, Alpha Company issued $150,000 of 9%, 10-year bonds. The bonds were issued at par plus accrued interest and are dated January 1, 2016. Interest is paid on July 1 and January 1. Use this information to prepare the General Journal entry (without explanation) for the April 30, 2016 issue of the bonds. If no entry is required then write "No Entry Required."

General Journal:

Date Accounts Debit Credit 4/30/16 Cash 150,000 Bonds Payable 150,000 To issue bond 9%, 10 years, at par

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Answer:

General Journal:

Date Accounts Debit Credit