XACC 291 Exercises and Problems Week 6
Exercises and Problems - Week 6
XACC/291
12/21/2014
Exercises and Problems - Week 6
Before After After Action Dividend Stock Split
Stock holders’ equity
Paid in capital
Common stock, $10 par $ 600,000 $630,000 $600,000
Paid in capital in excess par value $0. $12,000 0
Total paid in capital $600,000 $642,000 $600,000
Return earnings $900,000 $858,000 $900,000
Total stock holders’ equity $1,500,000 $1,500,000 $1,500,000
Outstanding shares $60,000 $66,000 $120,000
E 12-1
1. Companies purchase investments in debt or stock securities because they have excess cash, earnings from investment income, and strategic reasons.
2. A company will have excess cash it does not need for operations because of seasonal fluctuates it sales. The company will use excess funds for a bigger return than holding in the bank.
3. A typical investment when investing cash for a short period of time would be a short term government security.
4. A typical investment when investing in cash to generate earnings would be investing in debt.
5. A company would invest in securities that provide zero cash flow for strategic reasons such as influence over customers or make presence known by a related company in the industry.
6. A typical stock investment when investing cash for strategic reasons would be in a related or no related company. This will allow expansion and control.
E12-2
A.
Jan. 1 Debt Investments $50,000 Cash $50,000 (To record purchase of 50 Choate Co. bonds)
July1 Cash $2,000 Interest revenue $2,000 (To record receipt of interest on Choate Co. bonds)
July1 Cash $33,500 Loss on sale $8,050 Debt Investments $25,450 (To record sale of 30 Choate Co. bonds) B.
Dec.1 Interest
XACC/291
12/21/2014
Exercises and Problems - Week 6
Before After After Action Dividend Stock Split
Stock holders’ equity
Paid in capital
Common stock, $10 par $ 600,000 $630,000 $600,000
Paid in capital in excess par value $0. $12,000 0
Total paid in capital $600,000 $642,000 $600,000
Return earnings $900,000 $858,000 $900,000
Total stock holders’ equity $1,500,000 $1,500,000 $1,500,000
Outstanding shares $60,000 $66,000 $120,000
E 12-1
1. Companies purchase investments in debt or stock securities because they have excess cash, earnings from investment income, and strategic reasons.
2. A company will have excess cash it does not need for operations because of seasonal fluctuates it sales. The company will use excess funds for a bigger return than holding in the bank.
3. A typical investment when investing cash for a short period of time would be a short term government security.
4. A typical investment when investing in cash to generate earnings would be investing in debt.
5. A company would invest in securities that provide zero cash flow for strategic reasons such as influence over customers or make presence known by a related company in the industry.
6. A typical stock investment when investing cash for strategic reasons would be in a related or no related company. This will allow expansion and control.
E12-2
A.
Jan. 1 Debt Investments $50,000 Cash $50,000 (To record purchase of 50 Choate Co. bonds)
July1 Cash $2,000 Interest revenue $2,000 (To record receipt of interest on Choate Co. bonds)
July1 Cash $33,500 Loss on sale $8,050 Debt Investments $25,450 (To record sale of 30 Choate Co. bonds) B.
Dec.1 Interest