Question

FINANCIAL ACCOUNTING II On January 2, 2019, Reddenblack, Inc. bought 2.000 shares of Green Corp. $4 par, 5% preferred stock for $140,000. On that same day, the compan 10,000 shares (a 25% interest) in Blue Co.'s common stock for $820, $120,000 of Purple Company's common stock (12,000 shares). On van Reddenblack acquired $100.000 of 6% mortgage bonds of the Urany eu 100,000 of 6% mortgage bonds of the Orange Corporation their face value, which it intends to hold until the bonds mature in 2025. The only investments that Reddenblack owns. es of Green Corp.'s convertible hat same day, the company also bought common stock for $820,000, as well as 12,000 shares). On January 3, 2019, the bonds mature in 2025. These are the At December 31, 2019 (1) Purple Company reported earnings of $920.000. paid a cash dividend of $2 per share, and had a market value of $12 per share; () Green Corp. reported earnings of $743,000, paid its preferred dividend in cash to all shareholders, and had a market value of $65 per share; (iii) Orange Corporation reported a net loss from operations of $21,000, paid its annual interest to bondholders in cash, and had a market value of 97; and (iv) Blue Co. reported earnings of $560,000 for the year, paid a cash dividend of $3 per share, and had a market value of $86 per share. Prepare the journal entries for Reddenblack at December 31, 2019, relating to its investments.

Answer 1

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ANS: Amount in $. in the Books of Redden black, Inc. to yournal entry 017 December 31, 2019 for all dividende income i Date Accounts Debit Credit Dec-31-2019: Cash B ARC DE $ 400 To preferred Dividend $ 400 Income MC (Being preference dividend received for an amount of (2000 Share X$4X54) Ency Creen Ceгр. Cash All Dr $ 30000 To Dividend income All $ 30000 (Being dividend received from Blue Co. for an amount of 118000 $3)) cash All or $24000 To Dividend income All $ 24000 (Being dividend received from purple co for an amount of (12000K $2)) cash All Dr $6000 To interest on Bond AIC $ 6000 ( Benny interest on Bono neceived from orange corporation ) (100000 X 64)

s Journal entrey at 31 December for share revaluation & Date el-31--2019: - Accounts Debit credit $ 10000 $10000 preference Stork of Green corr ALL DO To Goodwill/CR AIC C Being pse ferred Stevens revaluech) ($ 1.40000 - 70 -65 = $5 x 2000) ECO $ 40000 $ 40000 - Goodwill / Capital Reserve All Dr To shares of Blue co. All (Being share of Blue co- reevalued) ($82000€ - 82 - 86 = 4 a 10ooo) $ 24900 $ 24000 Goodwill Capital Reserwe Arc Ox To shares of purple Co. AIC (Fe29 дуале «р Риль fe co re/ague d) ($120000 - $10-$12 - $2$ 12000) 1 2000

dire to the Note mortgage bone che una not be revalued dive to the vote Mortgage bond should not be renained changes in varue of shares.

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