Attached is the trial balance of James Appliance Company, for the year ended December 31, 2012. It..

Attached is the trial balance of James Appliance Company, for
the year ended December 31, 2012. It isn’t the final trial balance, but it
does contain all the adjustments

except
those relevant to the investments held by the company. JAMES’ POLICY IS TO
ACCRUE INCOME GENERATED FROM CASH DIVIDENDS ON THE DECLARATION

DATE.

A.
No entries had been made
to the Investment account during 2012. The detail to support the balance on
your trial balance follows:

Cost
FV (per share) as of
12/31/2012

100 shares of $4 ABD Corp. Preferred
Stock

$4,450

43

300 shares of Banana Tabulators,
Inc. Common

9,450

24

Five $1000 bonds of HAL Corporation
(8% coupon rate, interest
5,000

96

payable 6/1 and 12/1,
maturity 12/1/2020)

100 shares Consolidated Bell Common

7,400

70

1,000 shares of Red & Black
Transportation Corp. Common Stock
25,000

23.5

Total

$51,300

The ABD
preferred stock was purchased for cash income. This stock is readily
marketable, but there is no intention of selling this stock any time in the
near future.

ABD
declared the full stated dividend on December 15, 2012 and it is due to be
paid January 16, 2013. James Corp. owns 40% of ABD’s preferred stock, and
ABD’s

net income
for the year was $24,000

The Banana
Tabulator stock was originally purchased 3 years ago with the expectation
that it would grow sharply in value; the recent fall in the fair value of the
stock is

due,
according to James’ stock advisor, on a temporary depression in the tabulator
market so its value is expected to eventually recover. It is now the
intention of the

owner to
hold on to this security for probably two or three more years. No cash
dividends were declared or paid this year by Banana Tabulator.

The HAL
bonds and the Consolidated Bell common stock were both purchased in 2010 with
excess cash and to generate income. If additional cash is needed, it is

likely that
either security could be sold in the next year.

Interest was
paid from the HAL bonds on schedule.

Consolidated
Bell declared a stock dividend and distributed 20 shares of common stock to
James on September 15, 2012, when the fair market value of the common

stock was
at 72. On October 2, the corporation sold the 20 shares of stock from the
stock dividend at 71.50 and total commissions from the sale were $30.

Consolidated
Bell declared a cash dividend of $6.00 per share on December 5, 2012, which
is payable January 7, 2013.

Red &
Black Transportation, Inc. provides the majority of the transportation for
James’ inventory and the owner sits on R&B’s Board of Directors. R&B
has currently

issued and
outstanding 3,000 shares of voting common stock and James paid book value for
the stock. This year R&B reported $42,000 in net income. On November

10 it
declared a total of $12,000 in cash dividends to all its shareholders. Date
of record was November 30 and date of payment was December 9, 2012. There is
no

intention on
the part of management to sell any of this stock in the foreseeable future.

B.
These new securities were
purchased in 2012:

1
On September 1, 2012, James
purchased 1,600 shares of Fermi Wholesale Television Incorporated, which is
one of James’ major suppliers. At the time of

the purchase, Fermi had issued and
outstanding 6,400 shares of voting common stock. The business paid $25.25 per
share. Total commissions on the

purchase were $200. Fermi’s total
net loss for 2012 was $27,000, which was incurred evenly throughout the year.
Fermi declared no dividends during 2012

and the fair value of the stock was
24 by the end of the year. There is no intention to sell any Fermi common
stock any time soon.

2
On June 1, 2012, the company
purchased five $1,000 bonds issued by the City School District. These bonds
were purchased at 105 plus purchased interest.

$100 in commissions and taxes were
paid on the trade. The contract rate on these bonds is 6% with interest
payable on 4/1 and 10/1; these bonds mature

4/1/2017. It is the intention of
management to hold these bonds until they mature. On December 31, 2012, these
bonds had a fair value of 104. James uses Straight-Line (SL) method to
amortize premiums and discounts on its debt investments when appropriate.

3
On October 15, 2012, 100 shares of
Granny Smith common stock were purchased at 35; commissions and taxes paid on
the transaction were $125. This stock

trades OTC and is regularly
reported on NASDAQ. Management plans to sell its holding in Granny Smith to
take advantage of short-term price increases that

management believes will occur in
the first couple months of 2013. On November 30, when the stock was trading
at 50, it split 2:1. James sold 50 shares of the

shares it received from the split
at 24.25 on December 28, 2012. The fees to transact the sale were $75. A cash
dividend of $1 a share was declared December

20, 2012, with a date of record of
January 12, 2013, and a date of distribution of January 23, 2013. On December
31, 2012, the fair value of Granny Smith was

26

C.
The prepaid expenses include a
$3,000 annual premium paid for a whole-life insurance policy on the life of
the owner of the corporation with the

corporation as beneficiary. The
policy was dated March 1, 2012, and, according to the information from the
insurance company, as of December 31, 2012,

the investment portion of the
$3,000 premium was $1,000. This is the first year the insurance policy has
been in effect.

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