nsert 8 9 0 Delete 16-13 EXERCISES EX. 16-1 (S O. 2 and 3) The Williams Corporat
ID: 2590024 • Letter: N
Question
nsert 8 9 0 Delete 16-13 EXERCISES EX. 16-1 (S O. 2 and 3) The Williams Corporation accumulated the following data for its investments made on January 1, 2012 1. Purchased S100,000. 10%, 10-year Kilgus Corporation bonds for$105,000 n cash as a long-term investment. The bonds pay interest semi-annually on January 1 and July 1. Received the interest due on July 1 Purchased for cash 10% of Walton Inc.'s 400,000 shares of common stock at a cost of $20 per share plus brokers' fees of $5,000. In 2012, Walton reports net income of $100,000, and it declares and pays a $30,000 cash dividend on December 31 2. Acquired 40% of the common stock of Wilkerson Company for $500,000 cash. In 2012, Wilkerson Co and pays a $60,000 cash dividend on December 31 3. mpany reports net income of $70,000, and it declares Instructions (a) Journalize the entries for the bonds on January 1 and July1 (b) Journalize the 2012 entries for the Walton stock, assuming the cost method is used. c) Journalize the 2012 entries for the Wilkerson stock, assuming the equity method is used 3oExplanation / Answer
(a) Journalize the entries for the bonds on January 1 and July 1.
JOURNAL
Date
Account
Debit
Credit
Jan. 1
Investments in bonds
$1,05,000
Cash
$1,05,000
(Purchase of bonds for investments)
July. 1
Cash
$5,000
Interest Income
$4,750
Investments in bonds
$250
(Interest received on bonds, amortized the premium paid on purchase)
(b) Journalize the 2012 entries for Walton stock, assuming the cost method is used.
JOURNAL
Date
Account
Debit
Credit
Jan. 1
Stock Investments
$80,05,000
Cash
$80,05,000
(Purchase of shares in Walton Inc.)
Dec. 31
Cash
$3,000
Dividend revenue
$3,000
(Dividend received on stock investments)
(c) Journalize the 2012 entries for Wikerson stock, assuming the equity method is used.
JOURNAL
Date
Account
Debit
Credit
Jan. 1
Investments in Wikerson Company
$5,00,000
Cash
$5,00,000
(Purchase of shares in Wikerson Company)
Dec. 31
Investments in Wikerson Company
$28,000
Income from Investments in Wikerson Company
$28,000
(Share of net income earned by the company)
Dec. 31
Cash
$24,000
Investments in Wikerson Company
$24,000
(Dividend received on stock investments in Wikerson Company)
(a) Journalize the entries for the bonds on January 1 and July 1.
JOURNAL
Date
Account
Debit
Credit
Jan. 1
Investments in bonds
$1,05,000
Cash
$1,05,000
(Purchase of bonds for investments)
July. 1
Cash
$5,000
Interest Income
$4,750
Investments in bonds
$250
(Interest received on bonds, amortized the premium paid on purchase)
(b) Journalize the 2012 entries for Walton stock, assuming the cost method is used.
JOURNAL
Date
Account
Debit
Credit
Jan. 1
Stock Investments
$80,05,000
Cash
$80,05,000
(Purchase of shares in Walton Inc.)
Dec. 31
Cash
$3,000
Dividend revenue
$3,000
(Dividend received on stock investments)
(c) Journalize the 2012 entries for Wikerson stock, assuming the equity method is used.
JOURNAL
Date
Account
Debit
Credit
Jan. 1
Investments in Wikerson Company
$5,00,000
Cash
$5,00,000
(Purchase of shares in Wikerson Company)
Dec. 31
Investments in Wikerson Company
$28,000
Income from Investments in Wikerson Company
$28,000
(Share of net income earned by the company)
Dec. 31
Cash
$24,000
Investments in Wikerson Company
$24,000
(Dividend received on stock investments in Wikerson Company)
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