Question
Case A: On January 1, 2021, your company purchased 60,000 shares of Freeze Company's $10 par common stock for $26 per share in cash
Case A: On January 1, 2021, your company purchased 60,000 shares of Freeze Company's $10 par common stock for $26 per share in cash plus paid $10,000 of broker's fees. On that date, Freeze Company's assets and liabilities had a book value equal to market value except for their building which had a market value which was $80,000 higher than its book value and had a 20-year remaining life. 2021 2022 a. Purchased 60,000 shares of Freeze Company's $10 par common stock for $26 per share in cash plus paid $10,000 in broker's fees.. b. Received $30,000 in cash dividends. C. On December 31, 2021: 1. Freeze Company's stock had a market value of $25 per share. 2. Freeze Company reported net income of $400,000. d. Received a 10% stock dividend. e. On December 31, 2022: 1. Freeze Company's stock had a market value of $24 per share. 2. Freeze Company reported net income of $500,000. Assume the 60,000 shares you purchased represented 30% of the outstanding shares of Freeze Company so you were using he EQUITY method. Your company plans to hold on to the shares for several years. Prepare all entries for 2021 and 2022 for the above information Case B: You purchased $300,000 of 8%, 6-year bonds of Amazing Company on May 1, 2021, for $206,000 in cash. These bonds pay interest annually on April 30. You use the straight-line method of amortization. You plan to sell these bonds in 2022. Your year ends on December 31. Prepare the journal entries: a. To buy these bonds on May 1, 2021. b. To accrue interest and amortize the premium or discount on December 31, 2021. C. d. To mark to market on December 31, 2021 when the market value of these bonds was 101. To reverse the accrual on January 1, 2022 e. To collect the interest and amortize the premium or discount on April 30, 2022. f. To sell all of these bonds on June 1, 2022, for 101.5 plus accrued interest.
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