Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Exercise C-16A (25 minutes)
Quarter ended June 30, 2015
May 8 recorded amount (800,000 x $0.1323) ......................
$105,840
June 30 balance sheet amount (800,000 x $0.1352) ...........
108,160
Foreign exchange gain .........................................................
$ 2,320
Quarter ended September 30, 2015
June 30 balance sheet amount ............................................
$108,160
Sept. 30 balance sheet amount (800,000 x $0.1368) ..........
109,440
Foreign exchange gain .........................................................
$ 1,280
Quarter ended December 31, 2015
Sept. 30 balance sheet amount ............................................
$109,440
Dec. 31 balance sheet amount (800,000 x $0.1335) ...........
106,800
Foreign exchange loss .........................................................
$ 2,640
Quarter ended March 31, 2016
Dec. 31 balance sheet amount ............................................
$106,800
Feb. 10, 2016, amount received (800,000 x $0.1386) .........
110,880
Foreign exchange gain .........................................................
$ 4,080
Exercise C-17 (15 minutes)
1. Accounting for available-for-sale securities (and as explained in
Carrefour’s description of these securities), implies that any
2. The entirety of the € 18 million net unrealized losses on available-for-
sale securities are reported in Carrefour’s balance sheet as part of its
PROBLEM SET A
Problem C-1A (60 minutes)
Part 1
2015
Jan. 20
Short-Term Investments—Trading (Ford) .................
20,925
Cash ..................................................................
20,925
Purchased Ford Motor Co.
shares [(800 x $26.00) + $125].
Feb. 9
Short-Term Investments—Trading (Lucent) ........
97,928
Cash ..................................................................
97,928
Purchased Lucent shares
[(2,200 x $44.25) + $578].
Oct. 12
Short-Term Investments—Trading (Z-Seven) .......
5,825
Cash ..................................................................
5,825
Purchased Z-Seven shares
[(750 x $7.50) + $200].
Dec. 31
Fair Value Adjustment—Trading (ST)..................
5,322
Unrealized Gain—Income ...............................
5,322
Record fair value of securities.
$130,000 fair value - $124,678 cost; thus,
FVA—Trading s/b $5,322 Dr.
Note: Unadjusted FVA is $0; Ending bal. FVA s/b $5,322 Dr;
thus, entry must $5,322 Dr FVA.
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2015—F.V. Adj—Trading
Unadj.
0
Adj.
5,322
End.
5,322
Problem C-1A (Continued)
2016
Apr. 15
Cash ......................................................................
22,915
Gain on Sale of Short-Term Investments ....
1,990
Short-Term Investments—Trading (Ford) .....
20,925
Sold Ford Motor shares
[(800 x $29.00) - $285].
July 5
Cash ......................................................................
7,585
Gain on Sale of Short-Term Investments ....
1,760
Short-Term Investments—Trading (Z-Seven) ...
5,825
Sold Z-Seven shares
[(750 x $10.25) - $102.50].
July 22
Short-Term Investments—Trading (Hunt) ...........
48,444
Cash ................................................................
48,444
Purchased Hunt shares
[(1,600 x $30.00) + $444].
Aug. 19
Short-Term Investments—Trading (D.Karan)......
33,140
Cash ................................................................
33,140
Purchased Donna Karan shares
[(1,800 x $18.25) + $290].
Dec. 31
Unrealized Loss—Income ...................................
24,834
Fair Value Adjustment—Trading (ST) .......
24,834
Record fair value of securities.
$160,000 fair value - $179,512 cost*; thus,
FVA—Trading s/b $19,512 Cr.
Note: Unadjusted FVA is $5,322 Dr; Ending bal. FVA s/b
$19,512 Cr; thus, entry must be $24,834 Cr FVA.
*$124,678 - $20,925 - $5,825 + $48,444 + $33,140
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2016—F.V. Adj—Trading
Unadj.
5,322
Adj.
24,834
End.
19,512
Problem C-1A (Concluded)
2017
Feb. 27
Short-Term Investments—Trading (HCA) ................
116,020
Cash ................................................................
116,020
Purchased HCA shares
[(3,400 x $34.00) + $420].
Mar. 3
Cash ......................................................................
39,750
Loss on Sale of Short-Term Investments ................
8,694
Short-Term Investments—Trading (Hunt) .....
48,444
Sold Hunt shares [(1,600 x $25.00) - $250].
June 21
Cash ......................................................................
91,980
Loss on Sale of Short-Term Investments .........
5,948
Short-Term Investments—Trading (Lucent) ....
97,928
Sold Lucent shares [(2,200 x $42.00) - $420].
June 30
Short-Term Investments—Trading (B&D) ...........
57,595
Cash ................................................................
57,595
Purchased Black & Decker shares
[(1,200 x $47.50) + $595].
Nov. 1
Cash ......................................................................
32,541
Loss on Sale of Short-Term Investments .........
599
Short-Term Investments—Trading (D.Karan) ....
33,140
Sold Donna Karan shares
[(1,800 x $18.25) - $309].
Dec. 31
Fair Value Adjustment—Trading (ST)................
25,897
Unrealized Gain—Income .............................
25,897
Record fair value of securities.
$180,000 fair value - $173,615 cost*; thus,
FVA—Trading s/b $6,385 Dr.
Note: Unadjusted FVA is $19,512 Cr; Ending bal. FVA s/b
$6,385 Dr; thus, entry must $25,897 Dr FVA.
*$179,512 +$116,020 - $48,444 - $97,928 +$57,595 -$33,140
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2017—F.V. Adj—Trading
Unadj.
19,512
Adj.
25,897
End.
6,385
Problem C-2A (40 minutes)
Part 1
2015
Apr. 16
Short-Term Investments—AFS (Gem) .........................
97,180
Cash ...............................................................................
97,180
Purchased 4,000 shares of Gem
[(4,000 x $24.25) + $180].
May. 1
Short-Term Investments—AFS (T-bills) .......................
100,000
Cash ................................................................
100,000
Purchased U.S. Treasury bills.
July 7
Short-Term Investments—AFS (Pepsi) ........................
98,675
Cash ................................................................
98,675
Purchased 2,000 shares of PepsiCo
[(2,000 x $49.25) + $175].
20
Short-Term Investments—AFS (Xerox) ........................
16,955
Cash ................................................................
16,955
Purchased 1,000 shares of Xerox
[(1,000 x $16.75) + $205].
Aug. 3
Cash ...............................................................................
101,500
Short-Term Investments—AFS (T-bills) .................
100,000
Interest Revenue ..........................................................
1,500
Proceeds of U.S. Treasury bills
($100,000 x .06 x 13/52).
15
Cash .....................................................................................
3,400
Dividend Revenue ..................................................
3,400
Received dividends on Gem (4,000 x $0.85).
28
Cash* ....................................................................................
59,775
Short-Term Investments—AFS (Gem)** .................
48,590
Gain on Sale of Short-Term Investments .............
11,185
Sold 2,000 shares of Gem.
*(2,000 x $30) - $225 **($97,180 x 2,000/4,000)
Oct. 1
Cash ..............................................................................
3,800
Dividend Revenue ............................................
3,800
Received dividends on PepsiCo (2,000 x $1.90).
Dec. 15
Cash .........................................................................
2,100
Dividend Revenue ............................................
2,100
Received dividends on Gem (2,000 x $1.05).
31
Cash .........................................................................
2,600
Dividend Revenue ............................................
2,600
Received dividends on PepsiCo (2,000 x $1.30).
Problem C-2A (Continued)
Part 2
Comparison of Cost and Fair Values for AFS Portfolio
Unrealized
Cost Fair Value Gain (Loss)
Gem Co. (2,000 x $24.25) + 90a ............... $ 48,590
Problem C-3A (60 minutes)
Part 1
2015
Jan. 20
Long-Term Investments—AFS (J&J) .............................
20,740
Cash ..........................................................................
20,740
Purchased Johnson & Johnson
shares [(1,000 x $20.50) + $240].
Feb. 9
Long-Term Investments—AFS (Sony) ............................
55,665
Cash ..........................................................................
55,665
Purchased Sony shares
[(1,200 x $46.20) + $225].
June 12
Long-Term Investments—AFS (Mattel) ................................
40,695
Cash ....................................................................................
40,695
Purchased Mattel shares
[(1,500 x $27.00) + $195].
Dec. 31
Unrealized LossEquity ..............................................
3,650
Fair Value Adjustment—AFS (LT)* ..........................
3,650
Annual adjustment to fair values.
*
Cost
Fair Value
J & J ...................
$ 20,740
$ 21,500
Sony ...................
55,665
45,600
Mattel .................
40,695
46,350
Total ...................
$117,100
$113,450
J & J: 1,000 x $21.50 = $21,500
Sony: 1,200 x $38.00 = $45,600
Mattel: 1,500 x $30.90 = $46,350
Fair Adj.: $117,100 - $113,450 = $3,650
Problem C-3A (Continued)
2016
Apr. 15
Cash ..........................................................................................
22,975
Gain on Sale of Investments ................................
2,235
Long-Term Investments—AFS (J&J) ................................
20,740
Sold Johnson & Johnson shares
[(1,000 x $23.50) - $525].
July 5
Cash ..........................................................................................
35,615
Loss on Sale of Investments ..................................................
5,080
Long-Term Investments—AFS (Mattel) ..............................
40,695
Sold Mattel shares [(1,500 x $23.90) - $235].
July 22
Long-Term Investments—AFS (Sara Lee) ................................
13,980
Cash ....................................................................................
13,980
Purchased Sara Lee shares
[(600 x $22.50) + $480].
Aug. 19
Long-Term Investments—AFS (Eastman Kodak) .......................
15,498
Cash ....................................................................................
15,498
Purchased Eastman Kodak shares
[(900 x $17.00) + $198].
Dec. 31
Unrealized LossEquity ........................................................
10,168
Fair Value Adjustment—AFS (LT)* ................................
10,168
Annual adjustment to fair values.
*
Cost
Fair Value
Kodak ...................
$15,498
$17,325
Sara Lee ...............
13,980
12,000
Sony .....................
55,665
42,000
Total .....................
$85,143
$71,325
Kodak: 900 x $19.25 = $17,325
Sara Lee: 600 x $20.00 = $12,000
Sony: 1,200 x $35.00 = $42,000
$85,143 - $71,325 = $13,818
Fair Value Adjustment account:
Required balance ..... $13,818 Cr.
Unadjusted balance.. 3,650 Cr.
Required change...… $10,168 Cr.
Problem C-3A (Continued)
2017
Feb. 27
Long-Term Investments—AFS (Microsoft) ................................
161,325
Cash ...................................................................................
161,325
Purchased Microsoft shares
[(2,400 x $67.00) + $525].
June 21
Cash .........................................................................................
56,720
Gain on Sale of Investments ................................
1,055
Long-Term Investments—AFS (Sony) ...............................
55,665
Sold Sony shares [(1,200 x $48.00) - $880].
June 30
Long-Term Investments—AFS (Black & Decker) ........................
50,835
Cash ...................................................................................
50,835
Purchased Black & Decker shares
[(1,400 x $36.00) + $435].
Aug. 3
Cash .........................................................................................
9,315
Loss on Sale of Investments ................................
4,665
Long-Term Investments—AFS (Sara Lee) ...........................
13,980
Sold Sara Lee shares
[(600 x $16.25) - $435].
Nov. 1
Cash .........................................................................................
19,850
Gain on Sale of Investments ................................
4,352
Long-Term Investments—AFS (E. Kodak) ..........................
15,498
Sold Eastman Kodak shares
[(900 x $22.75) - $625].
Dec. 31
Fair Value Adjustment—AFS (LT)* ................................
21,858
Unrealized Loss—Equity ................................
13,818
Unrealized Gain—Equity ...................................................
8,040
Annual adjustment to fair values.
*
Cost
Fair Value
Black & Decker ..................
$ 50,835
$ 54,600
Microsoft .............................
161,325
165,600
Total ....................................
$212,160
$220,200
Black & Decker: 1,400 x $39.00 = $ 54,600
Microsoft: 2,400 x $69.00 = $165,600
$212,160 - $220,200 = $8,040 (fair value exceeds cost)
Fair Value Adjustment account:
Required balance ............ $ 8,040 Dr.
Unadjusted balance ........ 13,818 Cr.
Required change ............. $21,858 Dr.
