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Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 20Y6. The following transactions relate to securities acquired
Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 20Y6. The following transactions relate to securities acquired by Forte Inc., which has a fiscal year ending on December 31, 20Y6:
Jan. | 10 | Purchased an influential interest in Imboden Inc. for $750,000 by purchasing 144,400 shares directly from the estate of the founder of Imboden Inc. There are 380,000 shares of Imboden Inc. stock outstanding. |
Dec. | 31 | Received $58,000 of cash dividends on Imboden Inc. stock. Imboden Inc. reported net income of $460,000 in 20Y6. Forte Inc. uses the equity method of accounting for its investment in Imboden Inc. |
Required: | |
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1. | Journalize the entries to record these transactions. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. |
2. | Should Forte Inc.s investment in Imboden Inc. be reported at fair value on its financial statements for the year ending December 31, 20Y6? |
CHART OF ACCOUNTSForte Inc.General Ledger
ASSETS | |
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110 | Cash |
111 | Petty Cash |
120 | Accounts Receivable |
121 | Allowance for Doubtful Accounts |
131 | Notes Receivable |
132 | Interest Receivable |
141 | Merchandise Inventory |
145 | Office Supplies |
146 | Store Supplies |
151 | Prepaid Insurance |
163 | Investment in Imboden Inc. Stock |
165 | Valuation Allowance for Trading Investments |
166 | Valuation Allowance for Available-for-Sale Investments |
181 | Land |
191 | Store Equipment |
192 | Accumulated Depreciation-Store Equipment |
193 | Office Equipment |
194 | Accumulated Depreciation-Office Equipment |
LIABILITIES | |
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210 | Accounts Payable |
221 | Notes Payable |
231 | Interest Payable |
241 | Salaries Payable |
251 | Sales Tax Payable |
EQUITY | |
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311 | Common Stock |
312 | Paid-In Capital in Excess of Par-Common Stock |
321 | Preferred Stock |
322 | Paid-In Capital in Excess of Par-Preferred Stock |
331 | Treasury Stock |
332 | Paid-In Capital from Sale of Treasury Stock |
340 | Retained Earnings |
350 | Unrealized Gain (Loss) on Available-for-Sale Investments |
351 | Cash Dividends |
352 | Stock Dividends |
REVENUE | |
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410 | Sales |
611 | Interest Revenue |
612 | Dividend Revenue |
621 | Income of Imboden Inc. |
631 | Gain on Sale of Investments |
641 | Unrealized Gain on Trading Investments |
EXPENSES | |
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511 | Cost of Merchandise Sold |
512 | Bad Debt Expense |
515 | Credit Card Expense |
516 | Cash Short and Over |
520 | Salaries Expense |
531 | Advertising Expense |
532 | Delivery Expense |
533 | Repairs Expense |
534 | Selling Expenses |
535 | Rent Expense |
536 | Insurance Expense |
537 | Office Supplies Expense |
538 | Store Supplies Expense |
561 | Depreciation Expense-Store Equipment |
562 | Depreciation Expense-Office Equipment |
590 | Miscellaneous Expense |
710 | Interest Expense |
721 | Loss of Imboden Inc. |
731 | Loss on Sale of Investments |
741 | Unrealized Loss on Trading Investments |
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