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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.
