Appendix C – Investments and International Operations
Exercise C-8 (30 minutes)
2013
(a) Feb. 15
Short-Term Investments—HTM (A.G.) ……………..………….
160,000
Cash …………………………………………………….…
160,000
Purchased 90-day, 10% notes.
(b) Mar. 22
Long-Term Investments—AFS (Fran) ………………………….
35,850
Cash …………………………………………………….…
35,850
Purchased 700 shares of Fran common
stock ([700 x $51] + $150).
(c) May 15
Cash ………………………………………………………….………….
164,000
Short-Term Investments—HTM (A.G.) ………..………….
160,000
Interest Revenue …………………………………..………….
4,000
Collected proceeds of 10% notes
($160,000 x 10% x 90/360).
(d) July 30
Short-Term Investments—Trading (MP3) ………….………….
100,000
Cash …………………………………………………….…
100,000
Purchased 8% notes, due Jan. 30, 2014.
(e) Sept. 1
Cash ………………………………………………………….………….
700
Dividend Revenue ………………………………..………….
700
Received dividend on Fran shares
(700 x $1).
(f) Oct. 8
Cash* …………………………………………………………………….
22,275
Long-Term Investments—AFS (Fran)** ………………….
17,925
Gain on Sale of L-T Investments ……………………….
4,350
Sold 350 shares of Fran stock.
*([350 x $64] – $125) **($35,850/2)
(g) Oct. 30
Cash ………………………………………………………….………….
2,000
Interest Revenue …………………………………..………….
2,000
Received interest payment on 8% notes
($100,000 x .08 x 3/12).
Exercise C-9 (15 minutes)
Computation of Fair Value Adjustment
Fair
Value
Unrealized
Gain (Loss)
Nintendo Co. common stock ……………….………….
$ 48,900
Atlantic bonds payable ……………………….….
47,000
Kellogg Company notes payable …………………………..
23,200
McDonald’s Corp. common stock ………..…………………
44,800
$163,900
$ (850)
Dec. 31
Unrealized Loss—Equity …………………………………..…..
850
Fair Value Adjustment—AFS (ST) ……………………..
850
Record fair value adjustment for securities.
Exercise C-10 (15 minutes)
Dec. 31
Fair Value Adjustment—AFS (LT) …………………………..
32,078
Unrealized Loss—Equity …………………………..……..
1,927
Unrealized Gain—Equity …………………………………..
30,151
Record fair value of AFS securities.
Computation of Fair Value Adjustment
12/31/2012
12/31/2013
Cost ……………..…………..
$120,483
$60,120
Fair value …………………..
118,556
90,271
Gain (loss) …….…………..
$ (1,927)
$30,151
Adjustment = $1,927 + $30,151 = $32,078
(recovery of unrealized loss &
recording of unrealized gain)
Exercise C-12 (15 minutes)
1. Classification of Investments in Securities
a. The Brava Company bonds are a long-term investment in held-to–
maturity debt securities.
2. Fair Value Adjustment entry at December 31, 2013
Dec. 31
Fair Value Adjustment—AFS (LT) ……………………….….
10,825
Unrealized Gain⎯Equity ……………………………….….
10,825
Record fair value of securities ($255,800 – $266,625).
Long-term AFS securities
Cost
Fair Value
Buffa common stock …………..………………
$165,500
$178,000
Newton common stock ……….……………….
90,300
88,625
Totals ………………………………………………….
$255,800
$266,625
Exercise C-14 (15 minutes)
2013 return on total assets 2014 return on total assets
from 14.0% to 10.9%. However, without additional information, it is not
possible to determine whether Regae is within the normal range as
returns.
Exercise C-15A (25 minutes)
2013
Dec. 16
Accounts Receivable⎯Bronson Ltd. ……..………………
24,791
Sales ……………………………………………….………
24,791
Record credit sales (17,000 x $1.4583).
Dec. 31
Foreign Exchange Loss* ………………………..…
342
Accounts Receivable⎯Bronson Ltd …………………
342
Record year-end adjustment.
*Original measure = (17,000 x $1.4583) = $24,791
Year-end measure = (17,000 x $1.4382) = 24,449
Loss for the period = $ 342
2014
Jan. 15
Cash (17,000 x $1.4482) …………………………..
24,619
Accounts Receivable⎯Bronson Ltd. ..………………
24,449
Foreign Exchange Gain* …………………..………
170
Record cash receipt on account.
*Year-end measure = (17,000 x $1.4382) = $24,449
Final measure = (17,000 x $1.4482) = 24,619
Gain for the period = $ 170
$38,400
$60,300
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 2010 balance sheet as part of
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Solutions Manual, Appendix C
19
Problem C-1A (60 minutes)
Part 1
2013
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].
2014
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].
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].
Problem C-1A (Concluded)
2015
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].
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* …………………………
985
Unrealized Gain—Income ………………………………
985
To reflect an unrealized gain in fair values of
trading securities.