CHAPTER 15 Investments and Fair Value Accounting
Ex. 15–25
Ex. 15–26
Ex. 15–27
The investor would receive a return on the investment through share price
appreciation as internally generated funds are used to fund growth and earnings
Dividend Yield
=Cash Dividends per Share of Common Stock
Market Price per Share of Common Stock
15-21
CHAPTER 15 Investments and Fair Value Accounting
Ex. 15–28
Net income $50,000
Other comprehensive income (loss):
Ex. 15–29
Net income $210,000
Other comprehensive income (loss):
For the Year Ended December 31, 2016
CHEWCO CO.
For the Year Ended December 31, 2016
VALUR CO.
15-22
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–1A
1.
1 Investments—Avery Co. Bonds 75,000
Interest Receivable 875
Cash 75,875
16 Investments—Clawhammer Bonds 60,000
30 Cash* 29,575
Loss on Sale of Investment 600
Interest Revenue 175
Investments—Avery Co. Bonds 30,000
*($30,000 × 0.98) + $175
1 Cash* 1,800
Nov.
PROBLEMS
2016
May
15-23
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–1A (Concluded)
1 Cash* 1,575
Interest Receivable 1,050
Interest Revenue 525
2. If the bonds are classified as available-for-sale securities, then the portfolio
of bonds would need to be adjusted to fair value. This would be accomplished
2017
Mar.
15-24
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–2A
1.
14 Investments—Wilkomm Inc.* 200,500
Cash 200,500
*(5,000 shares × $40 per share) + $500
24 Investments—McMarsh Inc.* 90,198
Cash 90,198
*(1,800 shares × $50 per share) + $198
*
$179,400 – $186,438, in table below
Number
of Fair Value Fair
Shares per Share Cost Value
Wilkomm Inc. ………………
…
2,400 $40.10 $38 $ 96,240 $ 91,200
2016
Mar.
Apr.
Share
per
Cost
1
15-25
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–2A (Concluded)
4 Investments—Daley Inc.* 105,175
Cash 105,175
*(3,500 shares × $30 per share) + $175
28 Cash* 960
Dividend Revenue 960
2.
Current assets:
Trading investments (at cost) $270,578
3. Unrealized gains or losses are reported on the income statement, often as
“Other Income (Losses).” For 2016, Scofield Financial Co. would have
2017
Apr.
Balance Sheet (selected items)
December 31, 2017
June
SCOFIELD FINANCIAL CO.
15-26
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–3A
1.
22 Investments—Sankal Inc.* 396,000
Cash 396,000
*22,000 shares × $18 per share
8 Cash* 4,840
Dividend Revenue 4,840
*22,000 shares × $0.22 per share
8 Cash* 5,500
Jan.
Mar.
Sept.
2016
15-27
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–3A (Concluded)
12 Cash* 5,700
Dividend Revenue 5,700
*19,000 shares × ($0.25 + $0.05)
31 Cash 57,600
Investment in Imboden Inc. Stock 57,600
2.
Current assets:
Available-for-sale investments (at cost)1$342,000
Plus valuation allowance for available-for-
sale investments 76,000
Sept.
Dec.
FORTE INC.
December 31, 2017
Balance Sheet (selected items)
15-28
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–4A
a. $236,170 (see table below)
Market
Cost per Value per
No. of Share (or Share (or
Shares (or $100 of $100 of Total Fair
Investments face amount) face amount) face amount) Cost Value
Bernard Co. stock……
…
2,250 $17.00 $15.40 $ 38,250 $ 34,650
15-29
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–4A (Continued)
The completed comparative unclassified balance sheets are as follows:
Dec. 31, Dec. 31,
2017 2016
Cash $233,000 $220,000
Accounts receivable (net) 136,530 138,000
Interest receivable $ 600 —
Investment in Jolly Roger Co. stock—Note 2 98,100 $ 77,000
Office equipment (net) 115,000 130,000
Total assets $813,600 $666,270
Accounts payable $ 69,400 $ 65,000
Note 1. Investments are classified as available for sale. The investments at cost
and fair value on December 31, 2016, are as follows:
No. of Cost per Total Total Fair
Shares Share Cost Value
Bernard Co. stock………………………
…
2,250 $17.00 $ 38,250 $ 37,500
O’BRIEN INDUSTRIES, INC.
Balance Sheet
December 31, 2017 and 2016
15-30
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–4A (Concluded)
For December 31, 2017:
Market
Cost per Value per
No. of Share (or Share (or
Shares (or $100 of $100 of Total Fair
face amount) face amount) face amount) Cost Value
Bernard Co. stock…
…
2,250 $17.00 $15.40 $ 38,250 $ 34,650
Chadwick Co. stock
…
1,260 52.00 46.00 65,520 57,960
15-31
…
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–1B
1.
1 Investments—Smoke Bay Bonds 90,000
Interest Receivable 900
Cash 90,900
16 Investments—Geotherma Co. Bonds 42,000
Apr.
2016
May
15-32
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–1B (Concluded)
1 Cash* 2,340
Interest Receivable 1,950
Interest Revenue 390
2. If the bonds are classified as available-for-sale securities, then the portfolio
of bonds would need to be adjusted to fair value. This would be accomplished
2017
Feb.
15-33
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–2B
1.
14 Investments—Apollo Inc.* 124,992
Cash 124,992
*(4,800 shares × $26 per share) + $192
*(4,800 shares – 600 shares) × $0.20
31 Valuation Allowance for Trading Investments* 27,990
Unrealized Gain on Trading Investments 27,990
*
$181,150 – $153,160, in table below
Number
of Fair Value Fair
Shares per Share Cost Value
Apollo Inc. ……………………………
…
4,200 $26.04 $33.00 $109,368 $138,600
Dec.
Share
per
Cost
2016
Feb.
1
15-34
CHAPTER 15 Investments and Fair Value Accounting
Prob. 15–2B (Concluded)
14 Investments—Athena Inc.* 78,120
Cash 78,120
*(1,200 shares × $65 per share) + $120
26 Cash* 882
2.
Current assets:
Trading investments (at cost)* $200,032
3. Unrealized gains or losses are reported in the income statement, often
as “Other Income (Losses).” For 2016, Zeus Investments Inc. would have
2017
Mar.
June
December 31, 2017
Balance Sheet (selected items)
ZEUS INVESTMENTS INC.
15-35