established price of $24 on 5,050 SARs. The required service period i
s 2 years. The fair value of the SAR‟s are determined to be $6 on Dec
ember 31, 2012, and $13 on December 31, 2013.
Question 10
Hillsborough Co. has an available-forsale investment in the bonds of Schuyler with a carrying (and fair) val
ue of $88,020. Hillsborough determined that due to poor economic pr
ospects for Schuyler, the bonds have decreased in value to $57,020. It
is determined that this loss in value is otherthan temporary. Prepare the journal entry, if any, to record the reducti
on in value.
Question 11
Capriati Corporation made the following cash purchases of securities
during 2012, which is the first year in which Arantxa invested in secur
ities.
1. On January 15, purchased 11,700 shares of Gonzalez Company‟s c
ommon stock at $43.55 per share plus commission $2,574.
2. On April 1, purchased 6,500 shares of Belmont Co.‟s common stoc
k at $67.60 per share plus commission $4,381.
3. On September 10, purchased 9,100 shares of Thep Co.‟s preferred s
tock at $34.45 per share plus commission $6,383.
On May 20, 2012, Capriati sold 3,900 shares of Gonzalez Company‟s
common stock at a market price of $45.50 per share less brokerage co
mmissions, taxes, and fees of $3,705. The yearend fair values per share were: Gonzalez $39.00, Belmont $71.50, and
Thep $36.40. In addition, the chief accountant of Capriati told you th
at Capriati Corporation plans to hold these securities for the long term
but may sell them in order to earn profits from appreciation in prices.
Question 12
(Journal Entries for Fair Value and Equity Methods)
Presented below are two independent situations.
Prepare all necessary journal entries in 2012 for each situation.
Situation 1
Hatcher Cosmetics acquired 10% of the 207,400 shares of common st
ock of Ramirez Fashion at a total cost of $15 per share on March 18,
2012. On June 30, Ramirez declared and paid a $80,200 cash dividen
d. On December 31, Ramirez reported net income of $123,500 for the