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ACC 291 Week 3 - Galactica, Snider, and Davison

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ACC 291 Week 3 - WileyPLUS Answer Tutorial

Use this guide to help you reach the answers with ACC 291 week 3 equity and investment problems. Each problem may have a different set of figures to solve, but the steps to finding the solution are always the same. We're always here to provide support if you have questions after buying a study guide. That's what sets ACCNerd.com apart from other tutoring websites. 

Question 1

On January 1, 2010, Galactica Corporation had the following stockholders' equity accounts. Common Stock ($20 par value, 60,000 shares issued and outstanding) $1,200,000 Paid-in Capital in Excess of Par Value 200,000 Retained Earnings 600,000 During the year, the following transactions occurred.

Feb. 1 Declared a $1 cash dividend per share to stockholders of record on February 15, payable March 1. Mar. 1 Paid the dividend declared in February.

Apr. 1 Announced a 2-for-1 stock split. Prior to the split, the market price per share was $36.

July 1 Declared a 10% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the stock was $13 per share. 31 Issued the shares for the stock dividend.

Dec. 1 Declared a $0.50 per share dividend to stockholders of record on December 15, payable January 5, 2011. 31

Determined that net income for the year was $350,000. Hint: Prepare dividend entries and stockholders' equity section. (SO 1, 3) Instructions (a) Journalize the transactions and the closing entry for net income. (b) Enter the beginning balances, and post the entries to the stockholders' equity accounts. (Note: Open additional stockholders' equity accounts as needed.) (c) Prepare a stockholders' equity section at December 31.

Question 2

Davison Carecenters Inc. provides financing and capital to the health-care industry, with a particular focus on nursing homes for the elderly. The following selected transactions relate to bonds acquired as an investment by Davison, whose fiscal year ends on December 31. 2010 Jan. 1 Purchased at face value $2,000,000 of Hannon Nursing Centers, Inc., 10-year, 8% bonds dated January 1, 2010, directly from Hannon. July 1 Received the semiannual interest on the Hannon bonds. Dec. 31 Accrual of interest at year-end on the Hannon bonds. (Assume that all intervening transactions and adjustments have been properly recorded and that the number of bonds owned has not changed from December 31, 2010, to December 31, 2012.) 2013 Jan. 1 Received the semiannual interest on the Hannon bonds. Jan. 1 Sold $1,000,000 Hannon bonds at 106. The broker deducted $6,000 for commissions and fees on the sale. July 1 Received the semiannual interest on the Hannon bonds. Dec. 31 Accrual of interest at year-end on the Hannon bonds. Hint: Journalize debt investment transactions and show financial statement presentation. (SO 2, 5, 6) Instructions (a) Journalize the listed transactions for the years 2010 and 2013. Gain on sale of debt investment $54,000 (b) Assume that the fair value of the bonds at December 31, 2010, was $2,200,000. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value. (c) Based on your analysis in part (b), show the balance sheet presentation of the bonds and interest receivable at December 31, 2010. Assume the investments are considered long-term. Indicate where any unrealized gain or loss is reported in the financial statements. 

Question 3


On January 1, 2011, Snider Corporation had the following stockholders' equity accounts.

 

Common Stock ($12 par value, 93,500 shares issued and outstanding)

$1,122,000

Paid-in Capital in Excess of Par Value

201,900

Retained Earnings

523,900

During the year, the following transactions occurred.

Jan. 15

 

Declared a $1.10  cash dividend per share to stockholders of record on January 31, payable February 15.

Feb. 15

 

Paid the dividend declared in January.

Apr. 15

 

Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $15  per share.

May 15

 

Issued the shares for the stock dividend.

July 1

 

Announced a 2-for-1 stock split. The market price per share prior to the announcement was $18. (The new par value is $6.)

Dec. 1

 

Declared a $0.70 per share dividend to stockholders of record on December 15, payable January 10, 2012.

Dec. 31

 

Determined that net income for the year was $255,000.