Page 587 - Accounting Principles (A Business Perspective)

14. Stock investments

Total of the accounts with credit balances $11,277,000 $3,870,000
There is no intercompany debt at the end of the year.
Prepare a work sheet for consolidated financial statements on 2010 December 31.
Problem G Using the work sheet from Problem F, prepare the following items:

a. Consolidated income statement for the year ended 2010 December 31.
b. Consolidated statement of retained earnings for the year ended 2010 December 31.
c. Consolidated balance sheet for 2010 December 31.
Alternate problems

Alternate problems A On 2010 September 1, Ramsey Company purchased the following relatively long-term
investments classified as available-for-sale securities:
• Two thousand shares of Lacey Company capital stock at USD 439.20 plus broker's commission of USD
5,760.
• One thousand shares of Membrow Company capital stock at USD 705.60 plus broker's commission of USD
5,040.
Cash dividends of USD 18.00 per share on the Lacey capital stock and USD 14.40 per share on the Membrow
capital stock were received on December 7 and December 10, respectively.
On 2010 December 31, per share market values are Lacey, USD 460.80; and Membrow, USD 655.20.

a. Prepare journal entries to record these transactions.
b. Prepare the necessary adjusting entry(ies) at 2010 December 31, to adjust the carrying values assuming that
market price changes are believed to be temporary. Where would the accounts appear in the financial statements?
Alternate problem B Kress, Inc., purchased on 2010 July 2, 240 shares of Baker Company USD 180 par value
common stock as a temporary investment at USD 288 per share, plus a broker's commission of USD 432.
On 2010 July 15, a cash dividend of USD 7.20 per share was received. On 2010 September 1, Baker Company
split its USD 180 par value common shares two for one.

On 2010 November 2, Kress sold 200 shares of Baker common stock at USD 180, less a broker's commission of
USD 288.
a. Prepare journal entries to record all of the above transactions.
b. How would you recommend that the remaining shares be classified in the 2010 December 31, balance sheet if
still held at that date?
c. Assume the remaining shares were considered current assets classified as trading securities at the end of
2010, at which time their market value was USD 128 per share. Prepare any necessary adjusting entries for the end
of 2010.
Alternate problem C Prime Company acquired 90 per cent of the outstanding voting common stock of Orr

Company 2010 January 1, for USD 7,560,000 cash. Prime Company uses the equity method. During 2010 Orr
reported USD 1,512,000 of net income and paid USD 504,000 in cash dividends. The stockholders' equity section of
the 2009 December 31, balance sheet for Orr follows:
Stockholders' equity:
Paid-in capital:
Common stock, $21.00 $6,720,000
par
Retained earnings 1,680,000
Total stockholders' $8,400,000

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