Exercise D-8 (concluded)
Requirement 2
Purchase:
Debit
Credit
Investments
360,000
Cash
360,000
(Purchase common stock)
Net income:
Investments
Equity Income
Dividends:
(Receive cash dividends)
No adjustment is made under the equity method
Appendix D – Investments
Exercise D-9 (LO D-4)
1. 10% of the common stock of Beta.
2. 40% of the bonds of Gamma.
4. 15% of the bonds of Epsilon.
5. 25% of the common stock of Zeta.
6. 60% of the bonds of Eta.
7. 100% of the common stock of Theta.
Appendix D – Investments
Exercise D-10 (LO D-5)
Requirement 1
(1)
Date
(2)
Cash
Received
(3)
Interest
Revenue
(4)
Increase in
Carrying
Value
(5)
Carrying
Value
Face Amount
× Stated Rate
Carrying Value
× Market Rate
(3) – (2)
Prior Carrying
Value + (4)
1/ 1
$159,869
Requirement 2
January 1
June 30
December 31
Cash ($175,000 × 7% × ½)
6,125
Exercise D-11 (LO D-5)
Requirement 1
(1)
Date
(2)
Cash
Received
(3)
Interest
Revenue
(4)
Decrease in
Carrying
Value
(5)
Carrying
Value
Face Amount
× Stated Rate
Carrying Value
× Market Rate
(2) − (3)
Prior Carrying
Value − (4)
Requirement 2
January 1
Investments
June 30
Cash ($500,000 × 7% × ½)
17,500
December 31
Cash ($500,000 × 7% × ½)
17,500
Appendix D – Investments
PROBLEMS: SET A
Problem D-1A (LO D-2)
Requirement 1
January 2
Debit
Credit
105,000
February 14
Investments
7,200
May 15
Cash (300 shares × $62)
Loss (difference)
2,400
December 30
Cash
900
Problem D-1A (concluded)
Requirement 1 (concluded)
December 31
Investments
3,600
December 31
Investments
1,200
Requirement 2
The balance of the Investments account on December 31 is $96,000, equal to the
Problem D-2A (LO D-3)
($ in millions)
Purchase:
Debit
Credit
Investments
178
Net income:
Investments
32.50
($32.50 = $130 × 25%)
Dividends:
Cash
9.35
Problem D-3A (LO D-5)
Requirement 1
(1)
Date
(2)
Cash
Received
(3)
Interest
Revenue
(4)
Increase in
Carrying
Value
(5)
Carrying
Value
Face Amount
× Stated Rate
Carrying Value
× Market Rate
(3) − (2)
Prior Carrying
Value + (4)
1/ 1
$ 133,984
Requirement 2
January 1
June 30
Investments (difference)
December 31
Cash ($150,000 × 6% × ½)
4,500
Appendix D – Investments
Requirement 3
December 31
Requirement 4
Problem D-4A (LO D-5)
Requirement 1
Requirement 2
Cash ($180,000 × 8% × ½) ………………………….. 7,200
Requirement 3
Cash ($180,000 × 8% × ½) ………………………….. 7,200
Requirement 4
Since these are held-to-maturity securities, Justin Investor reports its investment
in the December 31, balance sheet at its amortized cost – that is, its book value:
Appendix D – Investments
PROBLEMS: SET B
Problem D-1B (LO D-2)
Requirement 1
February 2
Debit
Credit
52,500
Cash
52,500
February 4
Investments
19,200
Cash
July 15
Cash (400 shares ×$40)
16,000
Investments (400 shares × $35)
14,000
November 30
Cash
2,290
Problem D-1B (concluded)
Requirement 1 (concluded)
December 31
Unrealized Holding Loss–Other Comprehensive Income
4,400
December 31
Unrealized Holding Loss–Other Comprehensive Income
1,200
Requirement 2
The balance of the Investments account on December 31 is $52,100, equal to the
Problem D-2B (LO D-3)
($ in millions)
Purchase:
Debit
Credit
Investments
52
Net income:
Investments
2.7
Dividends:
Cash
1.5
Problem D-3B (LO D-5)
Requirement 1
(1)
Date
(2)
Cash
Received
(3)
Interest
Revenue
(4)
Increase in
Carrying
Value
(5)
Carrying
Value
Face Amount
Carrying Value
Prior Carrying
Requirement 2
January 1
Investments
419,422
June 30
Cash ($450,000 × 7% × ½)
Investments (difference)
16,777
December 31
Cash ($450,000 × 7% × ½)
15,750
Investments (difference)
16,818
Appendix D – Investments
Requirement 3
December 31
Cash
415,000
Loss (difference)
Problem D-4B (LO D-5)
Requirement 1
Requirement 2
Cash ($130,000 × 7% × ½) ………………………….. 4,550
Requirement 3
Cash ($130,000 × 7% × ½) ………………………….. 4,550
Requirement 4
Since these are held-to-maturity securities, Tsunami Sushi reports its
investment in the December 31, balance sheet at its amortized cost – that is, its
book value: