Question

[The following information applies to the questions displayed below.j During January 2016, Optimum Glass Company purchased the following securities as its long-term available-for-sale securities investment portfolio D Corporation common stock: 11,900 shares (95,900 outstanding) at $10 per share F Corporation bonds: $310,000 (10-year, 9 percent) purchased at par (not to be held to maturity) Subsequent to acquisition, the following data were available 2016 2017 Net income reported at December 31: $40,000 $365,000 $50,000 557,000 D Corporation F Corporatlon Dividends and interest paid during the year: $0.50 $27,900 $ 0.60 $27,900 D Corporation common stock cash dividends (per share) F Corporation bonds interest Fair value at December 31 $9.00 $266,000 $10.50 $276,000 D Corporation common stock (per share) F Corporation bonds value: 10.00 points Required 1. What accounting method should be used for the investment in D common stock? F bonds? Accounting Method D common stock F bonds 2-a. Prepare the journal entries for the company for each year to record purchase of the investments. (If no entry is required for a transactionlevent, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet Debit Credit Import a new list Record the 2016 purchase of 11,900 shares of D Corporation common stock for $10 per share and $310,000 of F corporation bonds at par. 1 2 Record the 2017 journal entry related to the 2016 purchase of the investments. Note:journal entry has been entered 2-b. Prepare the journal entries for the company for each year to record income reported by D and F Corporations. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet Credit Debit Import a new list Record the income reported by D Corporation of $40,000 and by F Corporation of $365,000 in 2016. 1 2 Record the income reported by D Corporation of $50,000 and by F Corporation of $557,000 in 2017 Note:-journal entry has been entered 2-c. Prepare the journal entries for the company for each year to record dividends and interest received from D and F Corporations. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Import a new list Record the dividends of $0.50 per share and interest of $27,900 received in 2016. 1 ved in 2 Record the dividends of $0.60 per share and interest of $27,900 received in 2017. Credit Note:-journal entry has been entered Record entry Clear entry View general journal 2-d. Prepare the joumal entries for the company for each year to record fair value effects at year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Import a new list 1 Record the fair value effects at 2016 year-end when D Corporation common stock is selling at $9.00 per share and F Corporation bonds are selling for $266,000 mmon for 2 Record the fair value effects at 2017 year-end when D Corporation common stock is selling at $10.50 per share and F Corporation bonds are selling for $276,000 Credit Note : Ф-journal entry has been entered View general journal Record entry Clear entry 3. For each year, show how the following items and their amounts should be reported on the financial statements: (Amounts to be deducted should be indicated by a minus sign.) OPTIMUM GLASS COMPANY Balance Sheet (Partial) 2016 2017 Long-term investments: Stockholders' equity: OPTIMUM GLASS COMPANY Income Statement (Partial) 2016 2017

Answer 1

1
	Accounting Method
D Common stocks	Equity Method
F bonds	Cost Method

2a.
Sr No.	Particulars	Debit	Credit
1	Shares of D Corporation A/c	119000
	Cash A/c		119000
	(Being 11900 shares bought as investment)
1	Bonds of F corporations A/c	310000
	Cash A/c		310000
	(Being 3100 bonds bought at par as investments)
2	No entry
2b.
Sr No.	Particulars	Debit	Credit
1	No entry
2	No entry
2c.
Sr No.	Particulars	Debit	Credit
1	Cash A/c	5950
	Investment Income		5950
	(Being Dividend received )
1	Cash A/c	27900
	Investment Income		27900
	(Being Interest received on bonds)
2	Cash A/c	7140
	Investment Income		7140
	(Being Dividend received )
2	Cash A/c	27900
	Investment Income		27900
	(Being Interest received on bonds)