Reference no: EM13981046
Diversified Services, Inc., offers a variety of business services, including financial services through its escrow division. Diversified entered into the following investment activities during the last month of 2011 and the first week of 2012. Diversified's fiscal year ends on December 31. The only securities held by Diversified at December 1 were 12 million common shares of Shelby Laminations, Inc., purchased in November for $50 million and classified as available for sale.
2011,Dec.1 Purchased $30 million of 12% bonds of VinceGill Amusement Corporation and $24 million of 10% bonds of Eastern Waste Disposal Corporation, both at face value and both to be held until they mature.
Interest on each bond issue is payable semiannually on November 30 and May 31.
9 Sold onehalf of the Shelby Laminations common shares for $26 million.
29 Received cash dividends of $1.5 million from the Shelby Laminations common shares.
30 Purchased U.S. Treasury bonds for $5.8 million as trading securities hoping to earn profits on shortterm differences in prices.
31 Recorded the necessary adjusting entry(s) relating to the investments.The year end market price of the Shelby Laminations common stock was $4.25 per share. The fair values of the bond investments were $32 million for VinceGill Amusement Corporation and $20 million for Eastern Waste Disposal Corporation. A sharp rise in short term interest rates on the last day of the year caused the fair value of the Treasury bonds to fall to $5.7 million.
2012,Jan. 7 Sold the remaining Shelby Laminations common shares for $27 million.
Required:
Prepare the appropriate journal entry for each transaction or event and show the amounts that would be reported in the company's 2011 income statement relative to these investments. Determine the effects of the Shelby Laminations investment on net income, other comprehensive income, and comprehensive income for 2011, 2012, and combined over both years.
2011,Dec.1 Purchased $30 million of 12% bonds of VinceGill Amusement Corporation and $24 million of 10% bonds of Eastern Waste Disposal Corporation, both at face value and both to be held until they mature. Interest on each bond issue is payable semiannually on November 30 andMay 31.
Dec.9 Sold onehalf of the Shelby Laminations common shares for $26 million.
Sale of onehalf of the Shelby Laminations shares results in a $1 million gain ($26 million sales price [$50 million cost · 2]).
Dec.29 Received cash dividends of $1.5 million from the Shelby Laminations common shares.
Dec.30 Purchased U.S. Treasury bonds for $5.8 million as trading securities, hoping to earn profits on short term differences in prices.
Dec.31 Recorded the necessary adjusting entry(s) relating to the investments.
2012,Jan. 7 Sold the remaining Shelby Laminations common shares for $27 million.
The fair value of the Shelby shares at the time of sale is $27 million. Those shares were purchased for $25 million ($50 million - ½), so the gain realized on the sale is $2 million.
Given that the fair value adjustment for the Shelby shares has a $0.5 million balance (recorded on 12/31/11), we need to remove that amount and eliminate the corresponding unrecognized gain from AOCI. This happens automatically when we next adjust the portfolio to fair value. If we were to make the adjustment separately, the entry would be:
The Shelby investment affected net income, other comprehensive income, and comprehensive income as follows ($ in millions):
|
Sample format for review of literature
: Hint: The Topic 2 readings provide appraisal questions that will assist you to efficiently and effectively analyze each article. Refer to "Sample Format for Review of Literature," "RefWorks," and "Topic 2: Checklist."
|
|
Name three diseases associated with pneumoconiosis
: What are the four basic steps in Risk Assessment as defined by the National Research Council and what does each component consist of?
|
|
Cattle has coincided with a decrease in consumer incomes
: A drought in Alberta and Saskatchewan has made grain, and therefore cattle feed, quite expensive. Many ranchers cannot afford to feed their cattle, and have sold much of their herd for slaughter. As it happens, the slaughter of beef cattle has coinci..
|
|
Questionnaire or telephone interview
: In the following situations, decide whether you would use a personal interview, observation, mailed questionnaire or telephone interview. Give your reasons.
|
|
Given that the fair value adjustment for the shelby shares
: Dec.30 Purchased U.S. Treasury bonds for $5.8 million as trading securities, hoping to earn profits on short term differences in prices.
|
|
Economies of the nations that are its major trading partners
: If income and consumption in the U.S. economy are growing faster than the economies of the nations that are its major trading partners, then U.S. imports are most likely:
|
|
What period will rod oscillate with when released
: A L = 1.33 m long metal rod Is pivoted from a point one third of the way along Its length. The rod has a mass of 0.464 kg. What period will the rod oscillate with when released from a small angle?
|
|
Single episode of a television show
: Choose one contemporary media artifact having to do with crime. This can be a single episode of a television show, a film, a bestselling book, a video game or a news report in any medium and write analysis of how this particular artifact portrays ..
|
|
Most appropriate for improving these economic conditions
: Actual GDP in a country is estimated to be 10% below potential GDP. Prices are virtually unchanged from one year ago. Unemployment is 12% of the labor force (much higher than the natural rate of unemployment). Which of the following policies would be..
|