Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Fundamental Accounting Principles, 21st Edition
908
Problem 15-5B (Concluded)
2014
Aug. 1
Cash ..........................................................................................
27,000
Dividend Revenue .............................................................
27,000
Received cash dividends (20,000 x $1.35).
2015
Jan. 8
Cash ..........................................................................................
375,000
Long-Term Investments—AFS (Bloch) ............................
200,500
Gain on Sale of Investments ................................
174,500
Sold Bloch shares.
2. Investment cost per share, January 7, 2015
3. Change in Brinkley's equity
Dividend Revenue-2013 ......................................
$ 21,000
Problem 15-6BA (60 minutes)
Part 1
2013
May 26
Accounts Receivable—Fuji ................................
60,450
Sales ................................................................
60,450
(6,500,000 yen x $0.0093/yen)
Oct. 15
Accounts Receivable—Martinez Brothers ............................
38,556
Sales ................................................................
38,556
(378,000 pesos x $0.1020/peso)
Dec. 31
Accounts Receivable--Martinez Brothers .............................
1,512
Foreign Exchange Gain* ................................
1,512
*Original measure = (378,000 pesos x $0.1020/peso) = $38,556
*Original measure = (250,000 yuans x $0.1439/yuan) = $35,975
2014
Jan. 5
Cash* .........................................................................................
39,500
Accounts Receivable—Chi-Ying** ................................
36,250
Fundamental Accounting Principles, 21st Edition
910
Problem 15-6BA (Concluded)
Part 2
Foreign exchange gain reported on 2013 income statement
July 25 ....................................................
$ (650)
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.
Serial Problem — SP 15
Serial Problem, Success Systems (35 minutes)
Part 1
2014
April 16
Short-Term Investments—Trading (J&J) ..................
20,300
Cash ................................................................
20,300
Purchased Johnson & Johnson shares
[(400 x $50) + $300].
Part 2 Adjusting entry at June 30, 2014
June 30
Fair Value Adjustment—Trading* ........................
850
* Fair Value Adjustment computations
Trading securities’
portfolio
Shares
Share Price
at 6/30/2014
Fair
Value
Cost
Unrealized
Gain (Loss)
J & J ......................
400
$55
$22,000
$20,300
$1,700
Reporting in Action — BTN 15-1
1. Yes, Polaris’s financial statements are consolidated. The statements
2. Polaris’s comprehensive income for the year ended December 31, 2011,
Net income ...........................................................................................
$227,575
Foreign currency translation adjustments, net of tax benefit of $6,782 .....
2,554
4. The return on total assets for the year ended December 31, 2011,
($thousands) follows:
Comparative Analysis — BTN 15-2
1. Polaris’s return on total assets
Current Year: $227,575 / [($1,228,024 + $1,061,647) / 2] = 19.9%
Arctic Cat’s return on total assets
2. Return on total assets = Profit margin x Total asset turnover
Polaris’s component analysis of return on total assets*
Current Year
19.9% = $227,575/$2,656,949 x$2,646,949/[($1,228,024 + $1,061,647)/ 2]
19.9% = 8.6% x 2.31
One Year Prior
Arctic Cat’s component analysis of return on total assets*
Current Year
5.0% = 2.8% x 1.79
One Year Prior
Fundamental Accounting Principles, 21st Edition
914
Comparative Analysis (Concluded)
3. Current Year Analysis: Polaris has the higher return on total assets
(19.9%) compared to Arctic Cat (5.0%), the higher profit margin (8.6%
vs. 2.8% for Arctic Cat) and the higher total asset turnover (2.31 vs. 1.79
for Arctic Cat). Of the two companies, Polaris’s return on total assets is
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-
the past year in net income (and neither in equity).
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
The $6,000 loss on the sale of Kemper common stock is correctly stated.
Jolee Company owned 40% of the outstanding shares, and therefore
compared to the net proceeds to determine gain or loss.
During year 2012, the income statement showed earnings from all
investments of $126,000. This amount included $81,000 from the
investment in Kemper (Kemper’s 2012 net income of $202,500 x 40%),
Taking It to the Net — BTN 15-5
($ millions for Parts 1 through 4)
1. At June 30, 2011 (total cost-basis) .................................................... $60,804
2. Mutual funds; Commercial paper; Certificates of deposit; U.S.
3. Unrealized gains = $3,052; and Unrealized losses = $(219).
(recorded basis) is $63,637; and the cost basis is $60,804.
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.
2013
Jan. 1
Internet Rights ...................................................
106,920
Accounts Payable .......................................
106,920
Agreed to pay for Internet rights
12,000,000 yen x $0.00891/yen
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
*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.
Fundamental Accounting Principles, 21st Edition
918
Hitting the Road— BTN 15-8A
Exchange rates can be found at businesses that specialize in foreign currency
Global Decision— BTN 15-9
1. Piaggio (Euro in thousands)
Return on total assets = Net Income / Average Total Assets
Current Year: 47,053 / [(1,520,184 + 1,545,722)/2] = 3.1%
Prior Year: 42,811/ [(1,545,722 + 1,564,820)/2] = 2.8%
Current Year
3.1% = 3.1% x 0.99
One Year Prior
2. (a) Current Year Analysis: Piaggio vs Polaris vs Arctic Cat
Company
Return on total assets*
Profit margin
Total asset turnover
Polaris
19.9%
8.6%
2.31
In the current year, Polaris has the highest return on total assets
followed by a distant second, Arctic Cat, and third, Piaggio. Polaris also
Global Decision (Concluded)
2. (b) Prior Year Analysis: Piaggio vs Polaris vs Arctic Cat
Company
Return on total assets*
Profit margin
Total asset turnover
Polaris
16.1%
7.4%
2.18
In the prior year, Polaris has the highest return on total assets, with
Arctic Cat and Piaggio having a return on total assets substantially
