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Chapter 15 - Investments and International Operations
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
Cash.................................................................. 4,650
Purchased Starbucks shares
[(200 x $22) + $250].
Part 2 Adjusting entry at June 30, 2016
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Chapter 15 - Investments and International Operations
Reporting in Action — BTN 15-1
1. Yes, Apple’s financial statements are consolidated. The statements are
labeled as “consolidated” in each of the financial statement headings.
2. Apple’s comprehensive income for the year ended September 28, 2013,
is $36,067 million. This comprehensive income amount is reported on
Apple’s consolidated statement of comprehensive income—a summary
follows.
3. Yes. Its consolidated statement of comprehensive income does include
4. The return on total assets for the year ended September 28, 2013, ($
millions) follows:
5. Answer depends on the annual report information obtained.
Comparative Analysis — BTN 15-2
1. Apple’s return on total assets
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Chapter 15 - Investments and International Operations
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
19.3% = $37,037/$170,910 x $170,910/[($207,000 + $176,064)/ 2]
19.3% = 21.7% x 0.89
Google’s component analysis of return on total assets*
*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.
21.6% for Google) and the higher total asset turnover (0.89 vs. 0.58 for
Google). Of the two companies, Apple’s return on total assets is
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Chapter 15 - Investments and International Operations
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 available-for-
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
5-year bonds they should be classified as long-term investments unless
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
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Chapter 15 - Investments and International Operations
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 $81,000 from the
Taking It to the Net — BTN 15-5
($ millions for Parts 1 through 4)
2. Mutual funds; Commercial paper; Certificates of deposit; U.S.
3. Unrealized gains = $3,249; and Unrealized losses = $(460).
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Chapter 15 - Investments and International Operations
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
Loss from Currency Translation...................... 60
Cash............................................................... 26,790
Paid ¼ of total amount due
*$106,920/4 **3,000,000 yen x $0.00893/yen
June 30 Accounts Payable.............................................. 26,730
Dec. 31 Accounts Payable.............................................. 26,730
Loss from Currency Translation...................... 180
Cash*.............................................................. 26,910
Paid ¼ of total amount due
*3,000,000 yen x $0.00897/yen
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.
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Education.
Chapter 15 - Investments and International Operations
Hitting the Road— BTN 15-8A
Exchange rates can be found at businesses that specialize in foreign currency
Global Decision— BTN 15-9
1. Samsung ( in millions)₩
Return on total assets = Net Income / Average Total Assets
Prior Year: 23,845,285 / [(181,071,570 + 155,800,263)/2] = 14.2%
Return on total assets = Profit margin x Total asset turnover
Current Year
15.4% = 30,474,764/228,692,667 x 228,692,667/[(214,075,018 + 181,071,570)/2]
15.4% = 13.3% x 1.16
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
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Chapter 15 - Investments and International Operations
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
Apple 28.6% 26.7% 1.07
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
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