Problem C-3B (Concluded)
Part 2
12/31/2015
12/31/2016
12/31/2017
Long-Term AFS Securities (cost)…………...
$117,773
$92,580
$126,260
Fair Value Adjustment ……………………...
(2,873)
2,220
(6,260)
Long-Term AFS Securities (fair value) …...
$114,900
$94,800
$120,000
2015
2016
2017
Realized gains (losses)
Sale of Ford shares ………………………….
$(7,240)
Sale of Polaroid shares …………………….
665
Sale of Duracell shares …………………….
$ (9,598)
Sale of Apple shares ………………………..
(7,450)
Sale of Sears shares ………………………..
______
______
2,721
Total realized gain (loss) ……………………
$ 0
$(6,575)
$(14,327)
Unrealized gains (losses) at year–end …
$(2,873)
$ 2,220
$ (6,260)
Problem C-4B (Continued)
2. Carrying value per share (see computations in part 1)
3. Change in Brinkley’s equity
Earnings from Bloch (for 2015) ………………….….
$ 20,500
Earnings from Bloch (for 2016) ………………….….
19,500
Gain on sale of investments ………………………….
182,500
Net increase ……………………………………………..….
$222,500
Part 2
1. Journal entries (assuming NO significant influence)
2015
Jan. 5
Long-Term Investments—AFS (Bloch) ……….………………….
200,500
Cash ……………………………………………………….
200,500
Purchased Bloch shares.
Aug. 1
Cash ………………………………………………………...……………………
21,000
Dividend Revenue ……………………………….……………………
21,000
Received cash dividend (20,000 x $1.05).
Dec. 31
Fair Value Adjustment—AFS (LT)* ……………..……………
37,500
Unrealized Gain—Equity …………………………..
37,500
Record fair value adjustment.
*20,000 x $11.90 = $238,000
$238,000 – $200,500 = $37,500
Problem C-6BA (60 minutes)
Part 1
2015
May 26
Accounts Receivable—Fuji ……………………….….
60,450
Sales …………………………………………………..…..
60,450
(6,500,000 yen x $0.0093/yen)
June 1
Cash ………………………………………………………...……………………
64,800
Sales …………………………………………………..…..
64,800
July 25
Cash* ………………………………………………………..……………………
59,800
Foreign Exchange Loss …………………………….……………………
650
Accounts Receivable—Fuji ………………….……….
60,450
*(6,500,000 yen x $0.0092/yen)
Oct. 15
Accounts Receivable—Martinez Brothers ….……………………
38,556
Sales …………………………………………………..…..
38,556
(378,000 pesos x $0.1020/peso)
Dec. 6
Accounts Receivable—Chi–Ying ………………..…………
35,975
Sales …………………………………………………..…..
35,975
(250,000 yuans x $0.1439/yuan)
Dec. 31
Accounts Receivable—Martinez Brothers …..……………………
1,512
Foreign Exchange Gain* …………………………..
1,512
*Original measure = (378,000 pesos x $0.1020/peso) = $38,556
Year-end measure = (378,000 pesos x $0.1060/peso) = 40,068
Gain for the period …………………………. = $ 1,512
Dec. 31
Accounts Receivable—Chi–Ying ………………..…………
275
Foreign Exchange Gain* …………………………..
275
*Original measure = (250,000 yuans x $0.1439/yuan) = $35,975
Year-end measure = (250,000 yuans x $0.1450/yuan) = 36,250
Gain for the period ………….……………… = $ 275
Jan. 5
Cash* ………………………………………………………..……………………
39,500
Accounts Receivable—Chi-Ying** ………..…………………
36,250
Foreign Exchange Gain ……………………….….
3,250
*(250,000 yuans x $0.1580/yuan) **($35,975 + $275)
Jan. 13
Cash* ………………………………………………………..……………………
39,274
Foreign Exchange Loss …………………………….……………………
794
Accounts Receivable—Martinez Bros** ….……………………
40,068
* (378,000 pesos x $0.1039/peso) ** ($38,556 + $1,512)
Problem C-6BA (Concluded)
Part 2
Foreign exchange gain reported on 2015 income statement
July 25 …………………………………………....
$ (650)
December 31…………………………………...
1,512
December 31…………………………………...
275
Total ……………………………………………....
$1,137
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 C
Serial Problem, Business Solutions (35 minutes)
Part 1
2016
April 16
Short-Term Investments—Trading (J&J) ……………...
20,300
Cash ……………………………………………………….
20,300
Purchased Johnson & Johnson shares
[(400 x $50) + $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
June 30
Fair Value Adjustment—Trading* …………………...
850
Unrealized Gain—Income ………………………....
850
To reflect an unrealized gain in fair values of
trading securities.
* Fair Value Adjustment computations
Trading securities’
portfolio
Shares
Share Price
at 6/30/2016
Fair
Value
Cost
Unrealized
Gain (Loss)
J & J ………………….
400
$55
$22,000
$20,300
$1,700
Starbucks……………
200
$19
3,800
4,650
(850)
Totals ………………..
$25,800
$24,950
$ 850