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nalin [4]
2 years ago
14

Novak Corporation purchased 380 shares of Sherman Inc. common stock for $12,900 (Novak does not have significant influence). Dur

ing the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share. Prepare Novak's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)
Business
1 answer:
harkovskaia [24]2 years ago
7 0

Answer:

A. Dr Equity Investments (Trading)$12,900

Cr Cash $12,900

B. Dr Cash $1,235

Cr Dividend Revenue $1,235

C. Dr Fair Value Adjustment (Trading) $1,350

Cr Unrealized Holding Gain or Loss-Income $1,350

Explanation:

A. Preparation of Novak's journal entries to record the purchase of the investment

Dr Equity Investments (Trading)$12,900

Cr Cash $12,900

B. Preparation of Novak's journal entries to record the dividends received

Dr Cash $1,235

($3.25 per share*380)

Cr Dividend Revenue $1,235

C. Preparation of Novak's journal entries to record the fair value adjustment

Dr Fair Value Adjustment (Trading) $1,350

Cr Unrealized Holding Gain or Loss-Income $1,350

[($37.50 per share*380)-$12,900]

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A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's una
wlad13 [49]

Answer:

$3,355

Explanation:

Accounts receivables = $ 352,000

Debit Allowance for uncollectible accounts = 630

Net Sales = $797,000

The company estimates that 0.5% of net credit sales are uncollectible

Estimates of uncollectible receivables

= 0.5% × $797,000

=$3985

This is the total amount to be recognized at the end of the year as Bad Debts Expense. Since a debit of $630 has been recognized already, additional debit required

= 3985 - 630

= $3,355

The amount to be debited to Bad Debts Expense when the year-end adjusting entry is prepared is $3,355.

5 0
3 years ago
What is a disadvantage of government bonds?
hjlf
None of those answers are suitable to me.

Government bonds are generally regarded as low-risk and they typically have modest (low) interest rates for return on investment, and these are advantages really. So we can discount answer A, C, and D.

I guess you could say that bonds can be hard to find (Answer B) but this not really true. There is always a bond market to trade bonds on. It requires setting up a trading account or speaking to a broker so this can be more difficult than putting money in a bank account, but to be honest I don't think any of those answers are appropriate for the question.
3 0
3 years ago
Read 2 more answers
Differentiate between ‘participatory leadership style’ and ‘autocratic leadership style’
Murrr4er [49]
Autocratic Leadership Style: gives the leader or a manger the authority as a whole.

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4 0
3 years ago
Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by co
KATRIN_1 [288]

Answer:

$58,500

Explanation:

The outside basis is defined as the tax basis that a partner has on the partnership. To find it, the value of all the resources contributed by the partner is taken and the debt relief and any debt assigned is subtracted. To solve this exercise, we should follow these steps:

1. Determine the contributed capital.

According to the problem statement, Brett provided cash ($ 9,500) and a building (here the value of the adjusted base, $ 39,000, is taken). Therefore, the total contributions are $48,500.

2. Calculate capital increases.

The partnership obtained a loan for $59,000, which was shared equally among the partners. Therefore, Brett received 50%, that is, $29,500.

Now, we must add the contributed capital plus capital increases:

48,500+29,500=78,000

3. Calculate mortgage debt issues.

The nonresource mortgage is 44,000, a value that exceeds the basis of the contributed property. In that case, the surplus is taxed to the contributing partner. To determine it, simply subtract the nonresource mortgage less adjusted basis of the building:

44,000-39,000=5,000

On the other hand, the remaining mortgage on the building is calculated, by dividing the value of the adjusted base of the property, in this case, 39,000 by 2, which results in 19,500.

Therefore, mortgage debt issues are equivalent to:

5,000+19,500=24,500

We add the contributed capital plus capital increases plus mortgage debt issues:

78,000+24,500=102,500

4. Subtract debts.

The partnership assumes the nonrecourse mortgage (which is computed as a debt) for 44,000. Because this component is not covered entirely by Brett, then this amount must be deducted from his individual tax base.

Therefore:

102,500-44,000=58,500

58,500 is Brett´s outside tax basis in his LLC interest.

On a balance sheet, we can see it as follows:

Particulars                                Amount in $

Cash                                                9,500

+Adjusted basis of the                39,000

building

+50% profit sharing ratio            29,500

+Nonrecourse mortgage               5,000

less adjusted basis

+Remaining mortgage on            19,500

building

TOTAL                                             102,500

-Debt on building                          (44,000)

Outside tax basis                          58,500

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Answer ASAP will give 45 points
Licemer1 [7]
Sorry I’m not really sure of the answer
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