Accounting 2020 Question

The following transactions and information pertain to Brown Co long term investments during 2015 and 2016 .  Brown did not own any long term investments prior to 2015.

·         Show the appropriate journal entries for each transactions in good form (show your computations if you need to calculate a number for the journal entry)

·         Show the relevant portions of each year’s balance sheet and income statement that reflects these transactions for both 2015 and 2016

2015

Sept 9   Purchased 1,000 shares of Packard, Inc. common stock for $80,000 cash.. These shares represent 30% of Packard’s outstanding share.

Oct 2      Purchased 2,000 shares of AT&T common stock for $60,000 cash.  These shares represent less than 1% ownership in AT&T.

Oct 17   Purchased as a long term investment 1,000 shares of Apple Computer common stock for $40,000 cash.  These shares are less than 1% of Apple’s outstanding shares.

Nov 1    Received $5,000 cash dividend from Packard.

Nov 30  Received $3,000 cash dividend from AT&T.

Dec 15   Received $1,400 cash dividend from Apple.

Dec 31   Packard’s 2015 net income is $70,000.

Dec 31   Market values for the investments in equity securities are Packard $84,000;   AT&T $48,000; and Apple Computer $45,000.

Dec 31   For preparing financial statements, note the following post-closing account balances: Common Stock, $500,000 and Retained Earnings $350,000.

 

2016

Jan 1      Sold Packard, Inc. shares for $108,000 cash.

May 30Received $3,100 cash dividend from AT&T.

June 15Received $1,600 cash dividend from Apple.

Aug 17  Sold the AT&T stock for $52,000 cash.

Aug 19  Purchased 2,000 shares of Coca Cola common stock for $50,000 cash as a long term investment. The stock represents less than a 5% ownership in Coca Cola.

Dec 15   Received $1,800 cash dividend from Apple.

Dec 31   Market values for the investments in equity securities are Apple Computer $39,000 and Coca Cola $48,000.

Dec 31   For preparing financial statements, note the following post-closing account balances: Common Stock, $500,000 and Retained Earnings $410,000.

 

Tips:

·         Account for the investment in Packard under the equity method.

·         Account for the investments in AT&T, Apple and Coca Cola as long term investments in available for sale.

·         Prepare the information for the two years balance sheets by including the appropriate asset and equity accounts.

·         List the relevant income statement items with account name and balance for each year.