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Title: question 1
QA_Ori: To be classified as current assets, investments must be (i) capable of being
converted into cash quickly and (ii) management must intend to sell the investments as
Title: question 2
QA_Ori: Short-term investments in trading securities are reported on the balance sheet
Title: question 3
QA_Ori: The $2,000 difference between the proceeds ($12,000) and the cost
Title: question 4
QA_Ori:
The three classes of noninfluential investments in securities are:
The two classes of influential investments in securities are:
Title: question 5
QA_Ori: To be classified as current assets, investments must be capable of being
converted into cash quickly and management must intend to sell the investments as a
Title: question 6
QA_Ori: Unrealized holding gains and losses are not reported on the standard
Title: question 7
QA_Ori:
Unrealized lossEquity ##
Fair Value Adjustment—Available-for-Sale (LT) ##
Title: question 8
QA_Ori: The portfolio for investments in available-for-sale securities should be reported
on the balance sheet at fair (market) value—this is separated into short- and long-term.
Title: question 9
QA_Ori: The portfolio of long-term investments in debt securities is reported at
Title: question 10
QA_Ori: The equity method is used when the investor has a “significant influence” over
Title: question 11
QA_Ori: A company prepares consolidated statements if the company has control over
Title: question 12
QA_Ori: Two major challenges in accounting for international operations include (1)
Title: question 13
QA_Ori: If the foreign exchange rate falls from $1.40 to $1.30 during the time the
U.S. company holds a receivable that is denominated in the foreign currency, the U.S.
Title: question 14
QA_Ori: No. If a sales agreement requires a foreign customer to pay U.S. dollars to the
Title: question 15
Title: question 16
QA_Ori: Arctic Cat reports $1,147 thousand of additional unrealized losses on
Title: question 17
QA_Ori: KTM’s financial statements, including its balance sheet, are all labeled as being
consolidated statements.
Title: question 18
QA_Ori:
Piaggio’s return on total assets as of December 31, 2011 is ($ thousands):
Title: Quick Study 15-1
QA_Ori:
[Note: This actively managed (for profit) short-term investment in equity securities would
be classified as Trading Securities.]
Apr. 18 Short-Term Investments—Trading (XLT) 12,850
Title: Quick Study 15-2
QA_Ori:
1. 2013
Dec. 31 Unrealized Loss—Equity 3,000
2. Both accounts in part (1) are reported on the balance sheet.
The Unrealized Loss is reported as a reduction in the equity section (and in
3.
2014
Apr. 6 Cash 26,000
Title: Quick Study 15-3
QA_Ori:
June 6 Cash 11,050
Title: Quick Study 15-4
QA_Ori:
May 9 Short-Term Investments—AFS (Higo) 5,150
June 2 Cash* 2,710
Dec. 31 Unrealized Loss – Equity* 275
Fair Value Adjustment—Available-for-Sale (ST) 275
5
0
Title: Quick Study 15-5
QA_Ori:
True: b, d, f, g
Title: Quick Study 15-6
QA_Ori:
1. Equity method
2. Fair value
3. Current (or short-term)
Title: Quick Study 15-7
QA_Ori:
July 31 Cash 1,200
Dec. 31 Interest Receivable 1,000
Title: Quick Study 15-8
QA_Ori:
Valuation Method: The fair value method is used to account for this investment in
long-term equity securities (AFS portfolio).
2013
May 20 Long-Term Investments—AFS (ORD) 1,000,000
2014
Aug. 5 Cash 625,000
Title: Quick Study 15-9
QA_Ori:
a.
Nov. 1 Cash 40,000
b.
Dec. 31 Long-Term Investments—ORD 280,000
Title: Quick Study 15-10
QA_Ori:
1.
Dec. 31 Unrealized LossEquity 12,000
2. Each of the accounts used in the entry for (1) would be reported on the balance
Title: Quick Study 15-11
QA_Ori:
subsidiary.
Title: Quick Study 15-12
QA_Ori:
1. Return on total assets = Net income / Average total assets
Title: Quick Study 15-13
QA_Ori:
1. Return on Total Assets = Profit margin x Total asset turnover
Net income / Average total assets = (Net income / Net sales) x (Net sales /
Average total assets)
2. Component analysis is useful as it allows the determination of whether return on
Title: Quick Study 15-14
QA_Ori:
Date of Sale
Date of Payment
Cash 13,500
Title: Quick Study 15-15
QA_Ori:
Mar. 1 Account Receivable—Hamac 9,076
Mar. 31 Cash 9,798
Title: Quick Study 15-16
QA_Ori:
For trading securities (and as explained in Carrefour’s description of its trading
Title: Exercise 15-1
QA_Ori:
a.
Mar. 22 Short-Term Investments—Trading (RIP) 10,080
b.
Sept. 1 Cash 1,000
c.
Oct. 8 Cash* 7,450
Title: Exercise 15-2
QA_Ori:
a.
b.
Sep. 16 Cash 1,025,000
Title: Exercise 15-3
QA_Ori:
a.
b.
Oct. 30 Cash 10,125
Title: Exercise 15-4
QA_Ori:
1. Debt securities reflect a creditor relationship such as investments in notes,
bonds, and certificates of deposit.
2. Equity securities reflect an owner relationship such as shares of stock issued by
companies.
3. Short-term investments are securities that (1) management intends to convert to cash
4. Long-term investments in securities are defined as those securities that are not
Title: Exercise 15-5
QA_Ori:
1. Consolidated financial statements show the financial position, results of
Title: Exercise 15-6
QA_Ori:
1.
2013
Dec. 31 Fair Value Adjustment—Trading 6,000
2. The accounts in part (1) are reported on different financial statements.
i. The $6,000 debit balance in the Fair Value Adjustment—Trading account is an adjunct
ii. The Unrealized Gain of $6,000 is reported in the Other Revenues and Gains section
of the income statement.
3.
2014
Jan. 3 Cash 35,000
Title: Exercise 15-7
QA_Ori:
Available-for-Sale Portfolio Cost Fair Value Unrealized Gain
(Loss)
Verrizano Corporation
bonds payable
$ 89,600 $ 91,600
Dec. 31 Unrealized Loss—Equity 9,100
Fair Value Adjustment—AFS (ST) 9,100
To reflect unrealized loss.
