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Q1) Roman Products, Inc. is wholesaler of men's hair products. Company started operations on January 1, 2010. The following transitions relate to securities acquired by Roman Products, Inc., thet has a fiscal year ending on December 31:

Jan 3. bought 3,000 shares of Whalen Inc. as available-for-sale investment at $46 per share, comprising brokerage commission.

July 6. Split Whalen Inc. stock 2 for 1 and get regular cash dividend of $0.60 per share on Whalen Inc. stock after the split.

Oct 14. Sold 900 shares of Whalen Inc. stock at $25 per share, less brokerage commission of $50.

Dec. 9. Received regular cash dividend of $0.60 per share

31. Whalen Inc. is categorised as available-for-sale investment and is adjusted to fair value of $21 per share. Use Valuation Allowance for Available-for-Sale Investments account in making Adjustment.

2011

Jan. 5. bought influential interest in Tasmania Co. for $620,000 by buying 60,000 shares directly from estate of the founder of Tasmania. There are 150,000 shares of Tasmania Co. stock outstanding.

July 8. Received regular cash dividend of $0.70 per share on Whalen Inc. stock.

Dec. 8 Received regular cash dividend of $0.70 per share plus extra dividend of $0.15 per share on Whalen Inc. stock

31. Received $18,000 of cash dividends of Tasmania Co. stock. Tasmania Co. reported net income of $74,000 in 2011. Roman Products uses equity method of accounting for its investment in Tasmania Co.

31. Whalen Inc. is classified as available-for-sale investment and is adjusted to fair value of $26 per share. Use Valuation Allowance for Available-for-Sale Investment account in making adjustment.

problems:

1. Journalize entries to record preceding transitions.

2. Create the investment related asset and stockholders equality balance sheet disclosures for Roman Products, Inc., on December 31, 2011, suppose Retained Earnings balance on December 31, 2011, is $455,000.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M920550

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