Exercise 15-16A (25 minutes)
Quarter ended June 30, 2015
May 8 recorded amount (800,000 x $0.1323)…………………. $105,840
Exercise 15-17 (15 minutes)
1. Accounting for available-for-sale securities (and as explained in
2. The entirety of the € 18 million net unrealized losses on
available-for-sale securities are reported in Carrefour’s balance sheet as
PROBLEM SET A
Problem 15-1A (60 minutes)
Part 1
2015
Jan. 20 Short-Term Investments—Trading (Ford)…………….. 20,925
Feb. 9 Short-Term Investments—Trading (Lucent)…….. 97,928
Oct. 12 Short-Term Investments—Trading (Z-Seven)…….. 5,825
Dec. 31 Fair Value Adjustment—Trading (ST)……………… 5,322
Unrealized Gain—Income………………………… 5,322
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2015—F.V. Adj—Trading
Unadj
.
0
Problem 15-1A (Continued)
2016
Apr. 15 Cash…………………………………………………………… 22,915
Gain on Sale of Short-Term Investments….. 1,990
July 5 Cash…………………………………………………………… 7,585
Gain on Sale of Short-Term Investments….. 1,760
July 22 Short-Term Investments—Trading (Hunt)………… 48,444
Cash……………………………………………………… 48,444
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
End. 19,51
2
Problem 15-1A (Concluded)
2017
Feb. 27 Short-Term Investments—Trading (HCA)……………. 116,020
Mar. 3 Cash…………………………………………………………… 39,750
June 21 Cash…………………………………………………………… 91,980
June 30 Short-Term Investments—Trading (B&D)………… 57,595
Nov. 1 Cash…………………………………………………………… 32,541
Loss on Sale of Short-Term Investments………. 599
Dec. 31 Fair Value Adjustment—Trading (ST)……………. 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
Problem 15-2A (40 minutes)
Part 1
2015
Apr. 16 Short-Term Investments—AFS (Gem)……………………. 97,180
May. 1 Short-Term Investments—AFS (T-bills)…………………..100,000
July 7 Short-Term Investments—AFS (Pepsi)……………………98,675
20 Short-Term Investments—AFS (Xerox)…………………..16,955
Cash…………………………………………………………….. 16,955
Aug. 3 Cash…………………………………………………………………..101,500
Short-Term Investments—AFS (T-bills)…………….. 100,000
15 Cash……………………………………………………………………………
3,400
28 Cash*………………………………………………………………………..
59,775
Oct. 1 Cash…………………………………………………………………… 3,800
Dec. 15 Cash…………………………………………………………….. 2,100
31 Cash…………………………………………………………….. 2,600
Problem 15-2A (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
a Brokerage fee attached to remaining 2,000 shares: $180 x (4,000 sh –2,000 sh.)/ 4,000 sh.= $90.
Part 3
Dec. 31 Unrealized LossEquity…………………………………………. 4,470
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
(a) Income statement
(i) Interest Revenue, $1,500
(b) Equity section of Balance sheet
Problem 15-3A (60 minutes)
Part 1
2015
Jan. 20 Long-Term Investments—AFS (J&J)………………………..20,740
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
J & J: 1,000 x $21.50 = $21,500
Problem 15-3A (Continued)
2016
Apr. 15 Cash…………………………………………………………………………….22,975
Gain on Sale of Investments…………………………………….. 2,235
July 5 Cash…………………………………………………………………………….35,615
July 22 Long-Term Investments—AFS (Sara Lee)……………………………13,980
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………………. $15,498 $17,325
Problem 15-3A (Continued)
2017
Feb. 27 Long-Term Investments—AFS (Microsoft)…………………………..161,325
June 21 Cash ……………………………………………………………………………56,720
Gain on Sale of Investments ……………………………………. 1,055
June 30 Long-Term Investments—AFS (Black & Decker)……………………50,835
Cash ……………………………………………………………………… 50,835
Aug. 3 Cash ……………………………………………………………………………9,315
Loss on Sale of Investments …………………………………………4,665
Nov. 1 Cash ……………………………………………………………………………19,850
Gain on Sale of Investments ……………………………………. 4,352
Dec. 31 Fair Value Adjustment—AFS (LT)*……………………………………21,858
Fair Value Adjustment account:
Required balance………… $ 8,040 Dr.
