M&JB Investment Corp. (with a 12/31 year-end) began operations on 1/1/X1 by issu
ID: 2544389 • Letter: M
Question
M&JB Investment Corp. (with a 12/31 year-end) began operations on 1/1/X1 by issuing 10,000 shares of $5 par value common stock to 5 shareholders. Each shareholder paid $40,000 for their 2,000 shares. M&JB uses straight-line amortization for bond investments, all of which paid annual interest when due on 12/31.Ignore income taxes. Round each transaction to the nearest dollar.
The following transactions took place:
20X1:
Jan. 1 Record the initial investment by the owners described above.
Bought the following Available-for-Sale (AFS) securities:
200 shares of ABC Co. common stock for $ 24 per share.
100 shares of DEF Co. common stock for $ 16 per share.
300 shares of GHI Co. common stock for $20 per share.
Jan. 1 Bought the following Held-to-Maturity securities:
30 bonds of PQR Co. for $938.00 per $1,000 bond.
100 bonds of STU Co. for $1,068.45 per $1,000 bond.
Feb. 2 Bought the following Trading Securities:
300 shares of JKL Co. common stock for $19 per share.
150 shares of MNO common stock for $18 per share.
Aug 3 Sold 200 shares of JKL Co. stock for $26.38 per share.
Bought 100 shares of VWX Co. common stock for $32 per share, classified as AFS Securities.
Sold 300 shares of GHI Co. stock for $21.51 per share.
Dec 15 Received cash dividends from common stock investments for 20X1
Dec 31 Investment expenses of $1,151 were paid in cash for the year
Received interest on bond investments, and made necessary amortizations
Made all necessary fair market value adjustments
Made all necessary closing entries
20X2:
Jan. 1 Issued 100 shares of $100 par value, 8%, cumulative Preferred Stock for $16,845. The Preferred Stock is convertible into common stock, 5 shares of common for each share of preferred.
Jan. 2 Bought 300 shares of RJB Co. common stock for $50 per share. Significant influence was achieved. Assume FVO was not elected.
Apr 2 Sold 100 shares of JKL Co. stock for $31.51 per share
Bought 150 more shares of MNO Co. common stock for $15 per share
Jul 1 Bought 300 shares of XYZ Co. common stock for $60.151 per share; classified as a trading security.
Sold 100 shares of DEF Co. stock for $18.38 per share
Nov1 Declared cash dividends to our shareholders of $1.38 per common share and $8 per preferred share.
Nov 15 Paid dividends declared on Nov. 1
Dec 15 Received cash dividends from common stock investments for 20X2
Dec 31 Investment expenses of $6,845 were paid in cash for the year
Received interest on bond investments, and made necessary amortizations
Made all necessary fair market value adjustments
Made all necessary closing entries
Required:
1.Prepare general journal entries to record the above transactions. Use Excel.
2.Prepare comparative financial statements for the two years. Include an Income Statement (including BEPS and DEPS - show your computations), a Statement of Shareholder Equity, and a Balance Sheet. Use Excel or other spreadsheet software.
Schedule A – Common Stocks
Company Name Shares O/S Dividends per Share FMV per share at:
20X1 20X2 20X1 20X2
ABC Co. 2,000 3.38 3.38 24.38 30.38
DEF Co. 3,000 4.38 4.38 14.38 16.38
JKL Co. 9,000 1.38 1.38 24.38 -
MNO Co. 8,000 2.38 2.38 16.38 15.38
VWX Co. 4,000 5.38 5.38 29.38 31.38
RJB Co. 1,000 21.51 21.51 - 90.38
XYZ Co. 7,000 6.38 6.38 - 59.38
Company Name Reported Earning for:
20X1 20X2
RJB Co. 40,000 46,845
Schedule B – Bonds
All investment bonds pay interest annually on December 31
Company Name Stated Interest Rate Maturity Date
PQR Co. 7.00 % 12/31/20X8
STU Co. 8.25 % 12/31/20X9
Explanation / Answer
1) Journal entries.
Cmparitive income statement
Working
Date Particulars Debit Credit 1-Jan Cash $200,000 Equity Share capital $50,000 Securities Premium $150,000 1-Jan Investment in ABC $4,800 Investment in DEF $1,600 Investment in GHI $6,000 Cash/Bank $12,400 1-Jan Investment in PQR Bond $28,140 Investment in STU Bond $106,845 Cash/Bank $134,985 2-Feb Investment in JKL $5,700 Investment in MNO $2,700 Cash/Bank $8,400 3-Aug Cash /Bank $11,729 Investment in JKL $3,800 Investment in GHI $6,000 Profit on sale of securities $1,929 3-Aug Invesment in VXW $3,200 Cash/Bank $3,200 15-Dec Cash/ Bank $2,147 Dividend received $2,147 31-Dec Investment Expense $1,151 Cash/Bank $1,151 31-Dec Investment in ABC $76 Unrealised Gain/ Loss- Other comprehensive income $348 Investment in DEF $162 Investment in VXO $262 ( Unrealised gain /loss on Available for sale security ) 31-Dec Investment in JKL $538 Investment in MNO $243 Unrealised Gain to profit & loss $295 ( Unrealised gain /loss on Available for trading security ) 31-Dec Cash/ Bank $8,250 Investment in STU bond $760 Interest Income $7,490 31-Dec Cash/ Bank $2,100 Investment in Bond $232 Interest Income $2,332 Entries for 2nd Year 1-Jan Cash/ bank $16,845 Preference share capital $10,000 Securities premium $6,845 2-Jan Investment in RJB $15,000 Cash/ Bank $15,000 2-Apr Cash/ Bank $3,151 To Investment in JKL $2,438 To Profit on sale of securities $713 2-Apr Investment in MNO $2,250 Cash/Bank $2,250 2-Jul Investment in XYZ $18,045 Cash/Bank $18,045 2-Jul Cash/ Bank $1,838 Investment in Def $1,438 Other comprehensive $162 To Profit on sale of securities $238 1-Nov Dividend A/c $14,600 Dividend Payable $14,600 15-Nov Dividend Payable $14,600 Cash/Bank $14,600 15-Dec Cash/ Bank $3,842 Dividend received 3842 15-Dec Cash/ Bank $6,453 Investment in RJB $6,453 31-Dec Investment Exps $6,845 Cash/ Bank $6,845 31-Dec Cash/ Bank $8,250 Investment in STU bond $760 Interest Income $7,490 31-Dec Cash/ Bank $2,100 Investment in Bond $232 Interest Income $2,332 31-Dec Investment in RJB $14,054 Share in Profit of associates $14,054 31-Dec Investment in ABC $1,200 Investment in VXW $200 Unrealised Gain/ Loss- Other comprehensive income $1,400 31-Dec Unreasiled gain /loss chared to p&l $69 Investment in XYZ $231 Investment in MNO $300.Related Questions
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