SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

Solutions Manual for Advanced Accounting 4e Hamlen, Huefner, Largay (All Chapters)

CHAPTER 1

SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

MULTIPLE CHOICE QUESTIONS

1.c

$180,000 - $160,000 = $20,000

$125,000 - $100,000 = 25,000

Total gain $45,000 2.a

$29,000 – $26,000 = $3,000

3.a $207,544 – [(6% x $200,000) – (4% x $207,544)] = $203,846 4.d Reclassification of unrealized loss on AFS securities sold$1,000 credit Unrealized gain on AFS securities held at year-end 6,000 credit (1) Total amount reported in OCI$7,000 credit (1) $81,000 – ($100,000 – $25,000) = $6,000 unrealized gain 5.d $5,000,000 + [40% x ($600,000 – $200,000)] = $5,160,000 6.b Stuvia.com - The Marketplace to Buy and Sell your Study Material

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• b

Reported net income; 35% x $7,000,000 = $ 2,450,000 Less unconfirmed profit on ending inventory 35% x [$6,000,000 – ($6,000,000/1.25)] = (420,000) Equity in net income for 2020 $ 2,030,000 Less dividends; 35% x $2,000,000 (700,000) Plus beginning investment balance 50,000,000 Ending investment balance $51,330,000

• d

Fizzy’s entry to record the acquisition is:

Current assets 25,000 Property 2,500,000 Goodwill 25,475,000 Liabilities 3,000,000 Cash 25,000,000

• b

• a

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EXERCISES

E1.1 Investment in Trading Securities

(in millions)

• $384 – 39 = $345

• Unrealized gains and losses on trading securities are reported in income.

c.Investment in trading securities 345 Cash 345

Investment in trading securities 39 Gain on trading securities (income) 39

d.Cash 370 Loss on trading securities (income) 14 Investment in trading securities 384

E1.2 Investment in Trading and Available-for-Sale Securities

• 2019 entries

Investment in trading securities 500,000 Cash 500,000

Investment in trading securities 20,000 Gains on trading securities (income) 20,000

2020 entries Cash 525,000 Investment in trading securities 520,000 Gains on trading securities (income) 5,000

Investment in trading securities 700,000 Cash 700,000

Losses on trading securities (income) 100,000 Investment in trading securities 100,000

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• (1) 2019 entries

Investment in AFS securities 500,000 Cash 500,000

Investment in AFS securities 20,000 Gains on AFS securities (OCI) 20,000

2020 entries Cash 525,000 Reclassification of gains on AFS securities (OCI) 20,000 Investment in AFS securities 520,000 Gains on AFS securities (income) 25,000

Investment in AFS securities 700,000 Cash 700,000

Losses on AFS securities (income) 100,000 Investment in AFS securities 100,000

(2) 2019 entries are the same as in (1).

2020 entries Cash 525,000 Reclassification of gains on AFS securities (OCI) 20,000 Investment in AFS securities 520,000 Gains on AFS securities (income) 25,000

Investment in AFS securities 700,000 Cash 700,000

Losses on AFS securities (income) 100,000 Allowance for credit losses on AFS securities (contra to investment account) 100,000

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