978-0077633059 Appendix C Solution Manual Part 6

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Problem C-4B (50 minutes)

Part 1

1. Journal entries (assuming significant influence)

2015

Jan. 5 Long-Term Investments—Bloch…………..……….….…….….…...200,500

Cash…………………………..…………..………………………………...200,500

Dec. 31 Long-Term Investments—Bloch…………..……….….…….….…...20,500

Earnings from Long-Term Investment…………..….……..... 20,500

2016

Aug. 1 Cash……………………………………………………………………………….27,000

Long-Term Investments—Bloch……..…….

27,000

Record cash dividend (20,000 x $1.35).

Dec. 31 Long-Term Investments (Bloch)……..…….….….….….…….….…19,500

2017

Jan. 8 Cash……………………………………………………………………………….375,000

*Investment carrying value at Jan. 7, 2017

Original cost…………..…….……..…………..$200,500

Less 2015 dividends…….……..…….…….. (21,000)

Plus 2015 earnings…….……………..…….. 20,500

Problem C-4B (Continued)

2. Carrying value per share (see computations in part 1)

3. Change in Brinkley’s equity

Earnings from Bloch (for 2015)…………….………..$ 20,500

Earnings from Bloch (for 2016)…………….……….. 19,500

Problem C-4B (Concluded)

2016

Aug. 1 Cash……………………………………………………………………………….27,000

Dec. 31 Fair Value Adjustment—AFS (LT)*…………..……………..….….…35,000

2017

Jan. 8 Cash……………………………………………………………………………….375,000

Long-Term Investments—AFS (Bloch)……….……………….200,500

Jan. 8 Unrealized Gain—Equity……………..……………..……………………72,500

2. Investment cost per share, January 7, 2017

3. Change in Brinkley’s equity

Dividend Revenue (for 2015)……………………….…$ 21,000

Dividend Revenue (for 2016)……………………….… 27,000

Problem C-5B (40 minutes)

Part 1

Available-for-sale securities on December 31, 2015

Security Cost Fair Value

27,500 shares of Company R common stock…..……..$559,125 $568,125

6,375 shares of Company S common stock….…...... 231,285 210,375

Disclosure

The portfolio of available-for-sale securities would be reported on the

December 31, 2015, balance sheet at its fair fair value of $959,063.

Part 2

Dec. 31 Unrealized LossEquity……………….…………………..……….…...16,267

*December 31, 2014, available-for-sale securities:

Cost Fair Value

$ 559,125 $ 599,063

December 31, 2015, adjustment to the Fair Value Adjustment account:

Part 3

Only gains or losses realized on the sale of available-for-sale securities

Year 2015 realized gain (loss)

Stock Sold Cost Sale Gain (Loss)

2,125 shares of Company S stock…...... $ 77,095 $ 71,055 $(6,040)

Problem C-6BA (60 minutes)

Part 1

2015

May 26 Accounts Receivable—Fuji…………..…………………….….…….…60,450

Sales……….………………………………..……………………….….…. 60,450

(6,500,000 yen x $0.0093/yen)

Oct. 15 Accounts Receivable—Martinez Brothers………….……….……38,556

Sales……….………………………………..……………………….….…. 38,556

(378,000 pesos x $0.1020/peso)

*Original measure = (378,000 pesos x $0.1020/peso) = $38,556

Year-end measure = (378,000 pesos x $0.1060/peso) = 40,068

Gain for the period …………………………. = $ 1,512

Dec. 31 Accounts Receivable—Chi-Ying……………….……………..….…..275

Foreign Exchange Gain*……………………….……………….….. 275

2016

Jan. 5 Cash*………..…………………..…………….……………….….…….….…..39,500

Accounts Receivable—Chi-Ying**……………….….….….….. 36,250

Foreign Exchange Loss……….………………..…………………….….794

Problem C-6BA (Concluded)

Part 2

Foreign exchange gain reported on 2015 income statement

July 25…………….……………………..…..….. $ (650)

December 31………..…………………..…..… 1,512

Part 3

To reduce the risk of foreign exchange gain or loss, Datamix could attempt

to negotiate foreign customer sales that are denominated in U.S. dollars.

To accomplish this, Datamix may be willing to offer favorable terms, such

NOTE: A few students may also understand the company’s opportunity for

Serial Problem — SP C

Serial Problem, Business Solutions (35 minutes)

Part 1

2016

April 16 Short-Term Investments—Trading (J&J).…...............20,300

Cash…………………………………..……………………. 20,300

Purchased Johnson & Johnson shares

[(400 x $50) + $300].

Part 2 Adjusting entry at June 30, 2016

June 30 Fair Value Adjustment—Trading*……………………. 850

* Fair Value Adjustment computations

Trading securities’

portfolio Shares

Share Price

at 6/30/2016

Fair

Value Cost

Unrealized

Gain (Loss)

J & J…………………. 400 $55 $22,000 $20,300 $1,700

Reporting in Action — BTN C-1

1. Yes, Apple’s financial statements are consolidated. The statements are

2. Apple’s comprehensive income for the year ended September 28, 2013,

Net income…………….……………………………….…………………..……………. $37,037

Change in foreign currency translation, net of tax effects of $35..….......... (112)

Total change in unrecognized gains/losses on derivative instruments,

net of tax…………………………………..……………………………………..…..…..…….

3. Yes. Its consolidated statement of comprehensive income does include

4. The return on total assets for the year ended September 28, 2013, ($

millions) follows:

5. Answer depends on the annual report information obtained.