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Serial Problem — SP 15
Serial Problem, Business Solutions (35 minutes)
Part 1
2016
April 16 Short-Term Investments—Trading (J&J)...................20,300
30 Short-Term Investments—Trading (Starbucks)....... 4,650
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)
Reporting in Action — BTN 15-1
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 $35............... (112)
3. Yes. Its consolidated statement of comprehensive income does include
4. The return on total assets for the year ended September 28, 2013, ($
millions) follows:
Comparative Analysis — BTN 15-2
1. Apple’s return on total assets
Google’s return on total assets
2. Return on total assets = Profit margin x Total asset turnover
—— Returns in part 2 can differ from those in part 1 due to rounding ——
Apple’s component analysis of return on total assets*
Current Year
One Year Prior
Google’s component analysis of return on total assets*
Current Year
One Year Prior
*Figures are rounded.
Comparative Analysis (Concluded)
3. Current Year Analysis: Apple has the higher return on total assets
(19.3%) compared to Google (12.6%), the higher profit margin (21.7% vs.
One Year Prior Analysis: Apple has the higher return on total assets
(28.5%) compared to Google (12.9%), the higher profit margin (26.7% vs.
This comparative analysis shows that Google could improve on all
Ethics Challenge — BTN 15-3
1. Kasey’s bonus is not contingent on the classification of
available-for-sale versus held-to-maturity. Designation of the bonds as
2. Generally, Kasey must classify its debt securities as either short or long
term and as available-for-sale or held-to-maturity. Since the bonds are
3. The company’s auditors (internal and external) and/or its board of
Communicating in Practice — BTN 15-4
TO: Mary Jolee
FROM: (Your Name)
SUBJECT: Sale of Kemper Common Stock
The $6,000 loss on the sale of Kemper common stock is correctly stated.
Jolee Company owned 40% of the outstanding shares, and therefore
During year 2014, the income statement showed earnings from all
investments of $126,000. This amount included $81,000 from the
Please call me if you have any questions.
Taking It to the Net — BTN 15-5
($ millions for Parts 1 through 4)
2. Mutual funds; Commercial paper; Certificates of deposit; U.S.
Teamwork in Action — BTN 15-6
There is no specific solution to this activity. The instructor should serve as
a facilitator during this learning reinforcement activity.
Entrepreneurial Decision — BTN 15-7
1.
2015
Jan. 1 Internet Rights.................................................. 106,920
2.
Mar. 31 Accounts Payable*........................................... 26,730
June 30 Accounts Payable............................................ 26,730
Sept. 30 Accounts Payable............................................ 26,730
Dec. 31 Accounts Payable............................................ 26,730
3. Since all of the company’s payments are to be in yen, the company can
buy yen in advance to “lock in” the payment amount.
NOTE: A few students might understand the company’s opportunity for hedging.
For example, this can involve selling foreign currency futures to be delivered at the
time that receivables from foreign customers will be collected.
Hitting the Road— BTN 15-8A
Exchange rates can be found at businesses that specialize in foreign currency
exchange. Also, American Express offices abroad exchange currencies for
cardholders and post foreign exchange rates. Typically, railroad stations and
airports also post foreign exchange rates and offer currency exchange services.
Global Decision— BTN 15-9
1. Samsung ( in millions)₩
Return on total assets = Net Income / Average Total Assets
Return on total assets = Profit margin x Total asset turnover
Current Year
One Year Prior
2. (a) Current Year Analysis: Samsung vs Apple vs Google
Return on total assets = Profit margin x Total asset turnover
Company Return on total assets* Profit margin Total asset turnover
In the current year, Apple has the highest return on total assets followed
by Samsung, and then Google. Apple also has the highest profit margin
Global Decision (Concluded)
2. (b) Prior Year Analysis: Samsung vs Apple vs Google
Return on total assets = Profit margin x Total asset turnover
Company Return on total assets* Profit margin Total asset turnover
In the prior year, Apple has the highest return on total assets followed
by Samsung, and then Google. Apple also has the highest profit margin
