Problem 15-3A (Concluded)
Part 2
12/31/2015 12/31/2016 12/31/2017
Long-Term AFS Securities (cost)………………. $117,100 $85,143 $212,160
Part 3
2015 2016 2017
Realized gains (losses)
Sale of Johnson & Johnson shares……. $ 2,235
Sale of Mattel shares…………………………. (5,080)
Problem 15-4A (30 minutes)
Part 1
1. Journal entries (assuming significant influence)
2015
Jan. 5 Long-Term Investments—Kildaire………………………………………1,560,000
Oct. 23 Cash…………………………………………………………………………….192,000
Dec. 31 Long-Term Investments—Kildaire………………………………………232,800
2016
Oct. 15 Cash…………………………………………………………………………….156,000
Long-Term Investments—Kildaire…………………………………156,000
Record cash dividend (60,000 x $2.60).
Dec. 31 Long-Term Investments—Kildaire………………………………………295,200
Earnings from Long-Term Investment………………………..295,200
Record equity in investee earnings
($1,476,000 x 20%).
2017
Jan. 2 Cash…………………………………………………………………………….1,894,000
Gain on Sale of Investments…………………………………….. 154,000
Long-Term Investments—Kildaire*……………………………….1,740,000
Sold Kildaire shares.
* Investment carrying value, January 2, 2017
Problem 15-4A (Continued)
2. Carrying value per share, January 1, 2017 (see computations in part 1)
3. Change in Selk’s equity due to stock investment
Part 2
1. Journal entries (assuming NO significant influence)
2015
Jan. 5 Long-Term Investments—AFS (Kildaire)…………………………….1,560,000
Oct. 23 Cash…………………………………………………………………………….192,000
Dec. 31 Fair Value Adjustment—AFS (LT)*…………………………………..240,000
2016
Oct. 15 Cash…………………………………………………………………………….156,000
Dec. 31 Fair Value Adjustment—AFS (LT)*…………………………………..120,000
Unrealized Gain—Equity………………………………………….. 120,000
Problem 15-4A (Concluded)
2017
Jan. 2 Cash…………………………………………………………………………….1,894,000
Jan. 2 Unrealized Gain—Equity………………………………………………..360,000
2. Investment cost per share, January 1, 2017
3. Change in Selk’s equity due to stock investment
Dividend Revenue (2015)…………………………. $192,000
Problem 15-5A (40 minutes)
Part 1
Available-for-sale securities on December 31, 2015
Security Cost Fair Value
3,500 shares of Company B common stock………….$ 79,690 $ 81,375
Disclosure
The portfolio of available-for-sale securities would be reported on the
Part 2
Dec. 31 Fair Value Adjustment—AFS*…………………………………………20,002
* December 31, 2014, available-for-sale securities
Cost _ Fair Value
$ 535,300 $ 490,000
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
appear on the 2015 income statement. Unrealized gains or losses appear
in the equity section of the balance sheet.
Year 2015 realized gains (losses)
Stock Sold Cost Sale Gain (Loss)
Problem 15-6AA (60 minutes)
Part 1
2015
Apr. 8 Cash…………………………………………………………………………….5,938
Sales………………………………………………………………………. 5,938
July 21 Accounts ReceivableSumito………………………………………..14,100
Sales………………………………………………………………………. 14,100
(1,500,000 yen x $0.0094/yen)
Oct. 14 Accounts ReceivableSmithers……………………………………..27,675
Dec. 31 Foreign Exchange Loss*………………………………………………..77
Accounts ReceivableHamid Albar…………………………… 77
2016
Jan. 12 Cash*……………………………………………………………………………27,928
Accounts ReceivableSmithers**……………………………… 27,778
Jan. 19 Cash*……………………………………………………………………………7,514
Problem 15-6AA (Continued)
Part 2
Foreign exchange loss reported on the 2015 income statement
November 18………………………………… $(300)
Part 3
To reduce the risk of foreign exchange gain or loss, Doering could attempt
to negotiate foreign customer sales that are denominated in U.S. dollars.
To accomplish this, Doering might be willing to offer favorable terms, such
PROBLEM SET B
Problem 15-1B (60 minutes)
Part 1
2015
Mar. 10 Short-Term Investments—Trading (AOL)……………….
143,505
May 7 Short-Term Investments—Trading (MTV)…………..184,105
Sept. 1 Short-Term Investments—Trading (UPS)……………69,950
Dec. 31 Unrealized Loss—Income……………………………….17,560
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2015—F.V. Adj—Trading
Unadj
.
0
0
Problem 15-1B (Continued)
2016
Apr. 26 Cash……………………………………………………………. 170,450
Apr. 27 Cash……………………………………………………………. 70,812
June 2 Short-Term Investments—Trading (SPW)…………….. 622,450
June 14 Short-Term Investments—Trading (W-M)…………. 46,307
Dec. 31 Fair Value Adjustment—Trading (ST)……………… 33,298
Unrealized Gain—Income………………………… 33,298
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. 17,56
0
Problem 15-1B (Concluded)
2017
Jan. 28 Short-Term Investments—Trading (Pepsi)…………. 88,890
Jan. 31 Cash…………………………………………………………….. 602,760
Aug. 22 Cash…………………………………………………………….. 133,720
Sept. 3 Short-Term Investments—Trading (Voda)………….. 62,430
Oct. 9 Cash…………………………………………………………….. 47,155
Dec. 31 Unrealized Loss—Income………………………………. 27,058
Fair Value Adjustment—Trading (ST)…………. 27,058
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2017—F.V. Adj—Trading
Unadj
.
15,738