978-0077633059 Appendix C Solution Manual Part 3

subject Type Homework Help
subject Pages 9
subject Words 1530
subject Authors John Wild, Ken Shaw

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Exercise C-16A (25 minutes)
Quarter ended June 30, 2015
May 8 recorded amount (800,000 x $0.1323)...................... $105,840
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Exercise C-17 (15 minutes)
1. Accounting for available-for-sale securities (and as explained in
Carrefours description of these securities), implies that any
2. The entirety of the 18 million net unrealized losses on available-for-
sale securities are reported in Carrefours balance sheet as part of its
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PROBLEM SET A
Problem C-1A (60 minutes)
Part 1
2015
Jan. 20 Short-Term Investments—Trading (Ford).................. 20,925
Feb. 9 Short-Term Investments—Trading (Lucent)........ 97,928
Cash.................................................................. 97,928
Purchased Lucent shares
[(2,200 x $44.25) + $578].
Oct. 12 Short-Term Investments—Trading (Z-Seven)........ 5,825
Dec. 31 Fair Value Adjustment—Trading (ST).................. 5,322
Unrealized Gain—Income............................... 5,322
Record fair value of securities.
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2015—F.V. Adj—Trading
Unadj
.
0
Adj. 5,322
End. 5,322
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Problem C-1A (Continued)
2016
Apr. 15 Cash...................................................................... 22,915
Gain on Sale of Short-Term Investments..... 1,990
July 5 Cash...................................................................... 7,585
July 22 Short-Term Investments—Trading (Hunt)............ 48,444
Cash................................................................ 48,444
Purchased Hunt shares
[(1,600 x $30.00) + $444].
Aug. 19 Short-Term Investments—Trading (D.Karan)....... 33,140
Dec. 31 Unrealized Loss—Income................................... 24,834
Fair Value Adjustment—Trading (ST)......... 24,834
Record fair value of securities.
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2016—F.V. Adj—Trading
Unadj
.
5,322
Adj. 24,83
4
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Problem C-1A (Concluded)
2017
Feb. 27 Short-Term Investments—Trading (HCA)................. 116,020
Mar. 3 Cash...................................................................... 39,750
Loss on Sale of Short-Term Investments................. 8,694
Short-Term Investments—Trading (Hunt)...... 48,444
Sold Hunt shares [(1,600 x $25.00) - $250].
June 21 Cash...................................................................... 91,980
June 30 Short-Term Investments—Trading (B&D)............ 57,595
Cash................................................................ 57,595
Purchased Black & Decker shares
[(1,200 x $47.50) + $595].
Nov. 1 Cash...................................................................... 32,541
Dec. 31 Fair Value Adjustment—Trading (ST)................. 25,897
Unrealized Gain—Income.............................. 25,897
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2017—F.V. Adj—Trading
Unadj. 19,51
2
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Problem C-2A (40 minutes)
Part 1
2015
Apr. 16 Short-Term Investments—AFS (Gem).......................... 97,180
May. 1 Short-Term Investments—AFS (T-bills).......................100,000
Cash......................................................................... 100,000
Purchased U.S. Treasury bills.
July 7 Short-Term Investments—AFS (Pepsi)........................98,675
20 Short-Term Investments—AFS (Xerox)........................16,955
Cash......................................................................... 16,955
Purchased 1,000 shares of Xerox
[(1,000 x $16.75) + $205].
Aug. 3 Cash...............................................................................101,500
15 Cash.......................................................................................
3,400
Dividend Revenue.................................................. 3,400
Received dividends on Gem (4,000 x $0.85).
28 Cash*.....................................................................................
59,775
Oct. 1 Cash................................................................................ 3,800
Dec. 15 Cash......................................................................... 2,100
Dividend Revenue............................................ 2,100
Received dividends on Gem (2,000 x $1.05).
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31 Cash......................................................................... 2,600
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Problem C-2A (Continued)
Part 2
Comparison of Cost and Fair Values for AFS Portfolio
Unrealized
Cost Fair Value Gain (Loss)
Gem Co. (2,000 x $24.25) + 90a............... $ 48,590
2,000 x $26.50.......................... $ 53,000
PepsiCo (2,000 x $49.25) + 175b............. 98,675
2,000 x $46.50.......................... 93,000
Part 3
Dec. 31 Unrealized LossEquity.................................................. 4,470
available-for-sale securities.
Part 4
The balance sheet would report the cost of these short-term investments in
available-for-sale securities at $164,220 and show a subtraction of $4,470
Part 5
(a) Income statement
(i) Interest Revenue, $1,500
(ii) Dividend Revenue, $11,900 [$3,400 + $3,800 + $2,100 + $2,600]
(b) Equity section of Balance sheet
(i) Subtraction from equity due to the Unrealized Loss, $4,470
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Problem C-3A (60 minutes)
Part 1
2015
Jan. 20 Long-Term Investments—AFS (J&J)..............................20,740
Cash........................................................................... 20,740
Purchased Johnson & Johnson
shares [(1,000 x $20.50) + $240].
Feb. 9 Long-Term Investments—AFS (Sony).............................55,665
June 12 Long-Term Investments—AFS (Mattel).....................................40,695
Dec. 31 Unrealized LossEquity................................................3,650
Fair Value Adjustment—AFS (LT)*........................... 3,650
Annual adjustment to fair values.
* Cost Fair Value
J & J................... $ 20,740 $ 21,500
Sony................... 55,665 45,600
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Problem C-3A (Continued)
2016
Apr. 15 Cash...........................................................................................22,975
July 5 Cash...........................................................................................35,615
July 22 Long-Term Investments—AFS (Sara Lee)..................................13,980
Cash..................................................................................... 13,980
Purchased Sara Lee shares
[(600 x $22.50) + $480].
Aug. 19 Long-Term Investments—AFS (Eastman Kodak)........................15,498
Dec. 31 Unrealized LossEquity..........................................................10,168
Fair Value Adjustment—AFS (LT)*...................................... 10,168
Annual adjustment to fair values.
* Cost Fair Value
Kodak: 900 x $19.25 = $17,325
Sara Lee: 600 x $20.00 = $12,000
Sony: 1,200 x $35.00 = $42,000
$85,143 - $71,325 = $13,818

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