Appendix C – Investments and International Operations
Problem C-6AA (60 minutes)
Part 1
2013
Apr. 8
Cash …………………………………………………………..………………….
5,938
Sales …………………………………………………….…
5,938
July 21
Accounts Receivable⎯Sumito …………………….…….
14,100
Sales …………………………………………………….…
14,100
(1,500,000 yen x $0.0094/yen)
Oct. 14
Accounts Receivable⎯Smithers …………………………..
27,675
Sales …………………………………………………….…
27,675
(19,000£ x $1.4566/£)
Nov. 18
Cash …………………………………………………………..………………….
13,800
Foreign Exchange Loss ………………………………………………….
300
Accounts Receivable⎯Sumito ……………….………….
14,100
(1,500,000 yen x $0.0092/yen)
Dec. 20
Accounts Receivable⎯Hamid Albar …………….…………….
7,652
Sales …………………………………………………….…
7,652
(17,000 ringgits x $0.4501/ringgits)
Dec. 31
Accounts Receivable⎯Smithers. ………………..…………
103
Foreign Exchange Gain * ……………………….….
103
Dec. 31
Foreign Exchange Loss* ……………………………..………………….
77
Accounts Receivable⎯Hamid Albar ……….………………….
77
*Original measure = (17,000 ringgits x $0.4501/ ringgits) = $7,652
Year-end measure = (17,000 ringgits x $0.4456/ ringgits) = 7,575
Loss for the period ……………………………………… = $ 77
2014
Jan. 12
Cash* ………………………………………………………….………………….
27,928
Accounts Receivable⎯Smithers** ………….……………….
27,778
Foreign Exchange Gain …………………………..
150
*(19,000£ x $1.4699/£) **($27,675 + $103)
Jan. 19
Cash* ………………………………………………………….………………….
7,514
Foreign Exchange Loss ………………………………………………….
61
Accounts Receivable⎯Hamid Albar** …….………………….
7,575
*(17,000 ringgits x $0.4420/ ringgits) **($7,652 – $77)
Problem C-6AA (Continued)
Part 2
Foreign exchange loss reported on the 2013 income statement
November 18 ………………………………...
$(300)
December 31………………………………….
103
December 31………………………………….
(77)
Total ……………………………………………...
$(274)
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Solutions Manual, Appendix C
33
Problem C-1B (60 minutes)
Part 1
2013
Mar. 10
Short-Term Investments—Trading (AOL) ………….
143,505
Cash …………………………………………………….
143,505
Purchased AOL shares
[(2,400 x $59.15) + $1,545].
May 7
Short-Term Investments—Trading (MTV) ………
184,105
Cash …………………………………………………….
184,105
Purchased MTV shares
[(5,000 x $36.25) + $2,855].
Sept. 1
Short-Term Investments—Trading (UPS) ………
69,950
Cash …………………………………………………….
69,950
Purchased UPS shares
[(1,200 x $57.25) + $1,250].
2014
Apr. 26
Cash ………………………………………………………….
170,450
Loss on Sale of Short-Term Investments …….
13,655
Short-Term Investments—Trading (MTV) …
184,105
Sold MTV shares [(5,000 x $34.50) – $2,050].
27
Cash ………………………………………………………….
70,812
Gain on Sale of Short-Term Investments .
862
Short-Term Investments—Trading (UPS) …
69,950
Sold UPS shares [(1,200 x $60.50) – $1,788].
June 2
Short-Term Investments—Trading (SPW) …………
622,450
Cash …………………………………………………….
622,450
Purchased SPW shares
[(3,600 x $172.00) + $3,250].
14
Short-Term Investments—Trading (W-M) ………
46,307
Cash …………………………………………………….
46,307
Purchased Wal-Mart shares
[(900 x $50.25) + $1,082].
Problem C-1B (Concluded)
2015
Jan. 28
Short-Term Investments—Trading (Pepsi) …..…
88,890
Cash …………………………………………………..…
88,890
Purchased PepsiCo shares
[(2,000 x $43.00) + $2,890].
31
Cash ………………………………………………………..…
602,760
Loss on Sale of Short-Term Investments …..…
19,690
Short-Term Investments—Trading (SPW) ……
622,450
Sold SPW shares [(3,600 x $168) – $2,040].
Aug. 22
Cash ………………………………………………………..…
133,720
Loss on Sale of S-T Investments ……………….…
9,785
Short-Term Investments—Trading (AOL) ……
143,505
Sold AOL shares [(2,400 x $56.75) – $2,480].
Sept. 3
Short-Term Investments—Trading (Voda) ………
62,430
Cash …………………………………………………..…
62,430
Purchased Vodaphone shares
[(1,500 x $40.50) + $1,680].
Oct. 9
Cash ………………………………………………………..…
47,155
Gain on Sale of Short-Term Investments …..…
848
Short-Term Investments—Trading (W-M) …..…
46,307
Sold Wal-Mart shares
[(900 x $53.75) – $1,220].
Unrealized Loss—Income ………………………………..
13,820
13,820
Problem C-2B (Concluded)
Part 2
Comparison of Cost and Fair Values of AFS Portfolio
Unrealized
Cost Fair Value Gain (Loss)
Nokia (2,550 x $41.25) + $2,250a ……… $107,437
Problem C-3B (Continued)
2014
Apr. 26
Cash ………………………………………………………………………………
50,043
Loss on Sale of Investments ……………………..……
7,240
Long-Term Investments—AFS (Ford) …….……………………
57,283
Sold Ford shares
[(2,500 x $20.50) – $1,207].
June 2
Long-Term Investments—AFS (Duracell) ……..……………………
35,700
Cash ……………………………………………………….
35,700
Purchased Duracell shares
[(1,800 x $19.25) + $1,050].
June 14
Long-Term Investments—AFS (Sears) …………………………..
25,480
Cash …………………………………………………..…..
25,480
Purchased Sears shares
[(1,200 x $21.00) + $280].
Nov. 27
Cash ………………………………………………………..……………………
29,755
Gain on Sale of Investments ………………..…………
665
Long-Term Investments—AFS (Polaroid) ………………………
29,090
Sold Polaroid shares
[600 x $51.00) – $845].
Dec. 31
Fair Value Adjustment—AFS (LT)* …………………………..
5,093
Unrealized Loss—Equity …………………………..
2,873
Unrealized Gain—Equity ……………………….….
2,220
Annual adjustment to fair values.
*
Cost _
Fair Value
Apple ………..
$31,400
$34,800
Duracell …….
35,700
32,400
Sears ………..
25,480
27,600
Total …………
$92,580
$94,800
Apple: 1,200 x $29.00 = $34,800
Duracell: 1,800 x $18.00 = $32,400
Sears: 1,200 x $23.00 = $27,600
$92,580 – $94,800 = $2,220
Fair Value Adjustment account:
Required balance ….. $2,220 Dr.
Unadjusted balance.. 2,873 Cr.
Required change …… $5,093 Dr.
Problem C-3B (Concluded)
Part 2
12/31/2013
12/31/2014
12/31/2015
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
Part 3
2013
2014
2015
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)