Appendix E – Reporting and Interpreting Investments in Other Corporations
Solutions Appendix E– Set B Exercises – Libby 8e
EE–1B.
Req. 1
July 1, 2015:
Held-to-maturity investments (+A) …………………………………..
5,000,000
Cash (–A) ……………………………………………………………..
5,000,000
Interest revenue (+R, +SE) ………………………………………
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EE–3B.
June 30, 2014:
Investments in SAS (+A) (11,000 shares x $25) ……………….
275,000
Cash (–A) ………………………………………………………………..
275,000
Dec. 31, 2014:
Investments in SAS (+A).. ……………………………………………..
33,000
Net unrealized losses/gains (+OCI, +SE) ……………………..
33,000
Investments in SAS (+A). ………………………………………………
44,000
Net unrealized losses/gains (+OCI, +SE) ……………………..
44,000
Dec. 31, 2016:
Net unrealized losses/gains (–OCI, –SE) …………………………
22,000
Investments in SAS (–A). ……………………………………………
22,000
Computations:
Year
Fair Value
−
Book Value before
Adjustment
=
Amount for
Adjusting Entry
2014
$308,000
−
$275,000
=
+$33,000
2015
352,000
−
308,000
=
+44,000
2016
330,000
−
352,000
=
−22,000
Balance in Net Unrealized Losses/Gains
+$55,000
Feb. 14, 2017:
Cash (+A) (11,000 shares x $27). …………………………………..
297,000
Net unrealized losses/gains (–OCI, –SE) …………………………
55,000
Investments in SAS (–A). ……………………………………………
330,000
Gain on sale of investment (+Gain, +SE) ……………………..
22,000
Note: The net unrealized losses/gains account is a balance sheet account. It does not
affect the computation of net income each year. Because it is a balance sheet account,
it maintains its balance from year to year. Therefore, the decline in stock price that
occurs in 2016 is reported as an adjustment to the net unrealized losses/gains account.
When the stock is sold in 2017, the net unrealized losses/gains are closed, and the
© 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale
or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole
or part.
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