Expert Answers

1) Jackson Company engaged in the following investment transactions during the current year.

Feb 17 Purchased 500 shares of Medical Company common shares for $20 per share plus a brokerage fee of $100. These are trading securities.

April 1. Bought 30,000 of the 100,000 outstanding shares of Olde Company for $300,000. Goodwill of 80,000 was included in the price.

 June 25. Received a $1.20 per share dividend on Medical Company stock.

 June 30. Olde Company reported second quarter profits of $20,000.

Oct 1. Purchase 2,000 shares of Alpha Company for $15 per share plus a brokerage fee of $400. These shares are classified as available for sale

Dec 31. Medical Co. shares are selling for $25 and Alpha stock is selling for $12.

Required:

Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments. Show work and calculations.

2) Grossman Products began operations in 2011. The following selected transactions occurred from September 2011 through March 2012. Grossman’s fiscal year ends on December 31. 2011: (a.) On September 5, Grossman opened a checking account and negotiated a short-term line of credit of up to $10,000,000 at 10% interest. The company is not required to pay any commitment fees. (b.) On October 1, Grossman borrowed $8,000,000 cash and issued a 5-month promissory note with 10% interest payable at maturity. (c.) Grossman received $3,000 of refundable deposits in December for reusable containers. (d.) For the September through December period, sales totaled $5,000,000. The state sales tax rate is 4% and 75% of sales are subject to sales tax. (e.) Grossman recorded accrued interest. 2012: (f.) Grossman paid the promissory note on the March 1 due date. (g.) Half of the storage containers are returned in March, with the other half expected to be returned over the next 6 months. Required: 1. Prepare the appropriate journal entries for the 2011 transactions. 2. Prepare the liability section of the balance sheet at December 31, 2011, based on the data supplied. 3. Prepare the appropriate journal entries for the 2012 transactions.