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Chapter 15 - Investments and International Operations
Problem 15-2B (Concluded)
Part 2
Comparison of Cost and Fair Values of AFS Portfolio
Unrealized
Cost Fair Value Gain (Loss)
Nokia (2,550 x $41.25) + $2,250a.......... $107,437
$340,232 $298,738 $41,494
a Brokerage fee attached to remaining 2,550 shares: $3,000 x (3,400 sh.– 850 sh.)/ 3,400 sh. = $2,250.
b Brokerage fee attached to remaining 1,200 shares: Entire $1,255 (none sold).
c Brokerage fee attached to remaining 2,500 shares: Entire $2,890 (none sold).
Part 3
Dec. 31 Unrealized Loss—Equity............................................. 41,494
Fair Value Adjustment—AFS (ST)................... 41,494
To reflect an unrealized loss in fair values of
available-for-sale securities.
Part 4
The balance sheet would report the cost of these short-term investments in
available-for-sale securities at $340,232 and show a subtraction of $41,494
Part 5
(a) Income statement
(i) Interest Revenue, $600
(b) Equity section of Balance sheet
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Chapter 15 - Investments and International Operations
Part 1
2015
Mar. 10 Long-Term Investments—AFS (Apple)....................................31,400
Cash..................................................................................... 31,400
Purchased Apple shares
[(1,200 x $25.50) + $800].
Apple: 1,200 x $27.50 = $33,000
Ford: 2,500 x $21.00 = 52,500
Polaroid: 600 x $49.00 = 29,400
$117,773 - $114,900 = $2,873
Problem 15-3B (Continued)
2016
Apr. 26 Cash...........................................................................................50,043
Loss on Sale of Investments...................................................7,240
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Chapter 15 - Investments and International Operations
June 2 Long-Term Investments—AFS (Duracell).................................35,700
Cash..................................................................................... 35,700
[(1,200 x $21.00) + $280].
Nov. 27 Cash ..........................................................................................29,755
Gain on Sale of Investments............................................. 665
Long-Term Investments—AFS (Polaroid)............................ 29,090
Sold Polaroid shares
* Cost _ Fair Value
Apple........... $31,400 $34,800
Duracell....... 35,700 32,400
Sears........... 25,480 27,600
Total............. $92,580 $94,800
Required balance ..... $2,220 Dr.
Unadjusted balance.. 2,873 Cr.
Required change ...... $5,093 Dr.
Problem 15-3B (Continued)
2017
Jan. 28 Long-Term Investments—AFS (Coca-Cola).............................41,480
Cash .................................................................................... 41,480
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Education.
Chapter 15 - Investments and International Operations
Long-Term Investments—AFS (Apple).............................. 31,400
Sold Apple shares [(1,200 x $21.50) - $1,850].
Gain on Sale of Investments ............................................ 2,721
Long-Term Investments—AFS (Sears)............................... 25,480
Sold Sears shares [(1,200 x $24.00) - $599].
Oct. 31 Cash ..........................................................................................26,102
Loss on Sale of Investments ..................................................9,598
Long-Term Investments—AFS (Duracell)........................... 35,700
Sold Duracell shares [(1,800 x $15.00) - $898].
* Cost _ Fair Value
Coca-Cola......................... $ 41,480 $ 48,000
Motorola............................ 84,780 72,000
Total................................... $126,260 $120,000
Unadjusted balance. . 2,220 Dr.
Required change....... $8,480 Cr.
Problem 15-3B (Concluded)
Part 2
12/31/2015 12/31/2016 12/31/2017
Long-Term AFS Securities (cost)................ $117,773 $92,580 $126,260
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Chapter 15 - Investments and International Operations
Part 3
2015 2016 2017
Realized gains (losses)
Sale of Ford shares............................... $(7,240)
Sale of Polaroid shares......................... 665
Sale of Duracell shares......................... $ (9,598)
Sale of Apple shares.............................. (7,450)
Problem 15-4B (50 minutes)
Part 1
1. Journal entries (assuming significant influence)
2015
Jan. 5 Long-Term Investments—Bloch.............................................200,500
Cash.....................................................................................200,500
Purchased Bloch shares.
2016
Aug. 1 Cash...........................................................................................27,000
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Chapter 15 - Investments and International Operations
Long-Term Investments—Bloch.......................................
27,000
Record cash dividend (20,000 x $1.35).
2017
Jan. 8 Cash...........................................................................................375,000
Long-Term Investments—Bloch*......................................192,500
Gain on Sale of Investments.............................................182,500
Sold Bloch shares.
*Investment carrying value at Jan. 7, 2017
Original cost...........................................$200,500
Less 2015 dividends.............................. (21,000)
Problem 15-4B (Continued)
2. Carrying value per share (see computations in part 1)
3. Change in Brinkley’s equity
Earnings from Bloch (for 2015)...........................$ 20,500
Chapter 15 - Investments and International Operations
Jan. 5 Long-Term Investments—AFS (Bloch)...................................200,500
Cash.....................................................................................200,500
Purchased Bloch shares.
*20,000 x $11.90 = $238,000
$238,000 - $200,500 = $37,500
Problem 15-4B (Concluded)
2016
Aug. 1 Cash...........................................................................................27,000
Dividend Revenue.............................................................. 27,000
Received cash dividends (20,000 x $1.35).
2017
Jan. 8 Cash...........................................................................................375,000
Long-Term Investments—AFS (Bloch).............................200,500
Gain on Sale of Investments.............................................174,500
Sold Bloch shares.
related accounts.
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Chapter 15 - Investments and International Operations
2. Investment cost per share, January 7, 2017
$200,500 / 20,000 shares = $10.03*
*rounded to the nearest cent
3. Change in Brinkley's equity
Dividend Revenue (for 2015)...............................$ 21,000
Problem 15-5B (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
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
*December 31, 2014, available-for-sale securities:
Cost Fair Value
$ 559,125 $ 599,063
308,380 293,250
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Chapter 15 - Investments and International Operations
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 gain (loss)
Stock Sold Cost Sale Gain (Loss)
Problem 15-6BA (60 minutes)
Part 1
2015
May 26 Accounts Receivable—Fuji.....................................................60,450
Sales.................................................................................... 60,450
(6,500,000 yen x $0.0093/yen)
June 1 Cash...........................................................................................64,800
Sales.................................................................................... 64,800
Dec. 31 Accounts Receivable--Martinez Brothers..............................1,512
Foreign Exchange Gain*.................................................... 1,512
*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
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Chapter 15 - Investments and International Operations
2016
Jan. 5 Cash*.........................................................................................39,500
Accounts Receivable—Chi-Ying**.................................... 36,250
Foreign Exchange Gain..................................................... 3,250
*(250,000 yuans x $0.1580/yuan) **($35,975 + $275)
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
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