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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
2016
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
Reporting in Action — BTN C-1
1. Yes, Apple’s financial statements are consolidated. The statements are
2. Apple’s comprehensive income for the year ended September 28, 2013,
is $36,067 million. This comprehensive income amount is reported on
Apple’s consolidated statement of comprehensive income—a summary
follows.
Net income ...........................................................................................
$37,037
Change in foreign currency translation, net of tax effects of $35 ................
(112)
Total change in unrecognized gains/losses on derivative instruments,
net of tax.........................................................................................................
64
Total change in unrealized gains/losses on marketable securities, net
of tax ...............................................................................................................
(922)
Total comprehensive income ...............................................................
$36,067
4. The return on total assets for the year ended September 28, 2013, ($
5. Answer depends on the annual report information obtained.
Comparative Analysis — BTN C-2
1. Apple’s return on total assets
Current Year: $37,037 / [($207,000 + $176,064) / 2] = 19.3%
2. Return on total assets = Profit margin x Total asset turnover
—— Returns in part 2 can differ from those in part 1 due to rounding ——
Apple’s component analysis of return on total assets*
Current Year
One Year Prior
Google’s component analysis of return on total assets*
Current Year
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
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Financial and Managerial Accounting, 6th Edition
896
Comparative Analysis (Concluded)
3. Current Year Analysis: Apple has the higher return on total assets
(19.3%) compared to Google (12.6%), the higher profit margin (21.7% vs.
21.6% for Google) and the higher total asset turnover (0.89 vs. 0.58 for
Google). Of the two companies, Apple’s return on total assets is
