CHAPTER 16
SOLUTIONS TO PROBLEMS: SET B
PROBLEM 16-1B
(a) 2016
Jan. 1 Debt Investments …………………………... 400,000
Cash ………………………………………. 400,000
2019
Jan. 1 Cash …………………………………………….. 36,000
Interest Receivable …………………. 36,000
(b) 2016
Dec. 31 Unrealized Gain or Loss—Equity ……. 15,000
PROBLEM 16-1B (Continued)
(c) Balance Sheet
Current assets
Interest receivable ……………………………………………… $ 36,000
PROBLEM 16-2B
(a) Feb. 1 Stock Investments ………………………………. 30,800
Cash ……………………………………………. 30,800
Mar. 1 Stock Investments ………………………………. 20,300
Cash ……………………………………………. 20,300
Aug. 1 Cash (300 X $69) …………………………………. 20,700
Stock Investments
[($30,800 ÷ 500) X 300] ………………. 18,480
Gain on Sale of Stock Investments… 2,220
1 Cash ………………………………………………….. 44,000
Debt Investments …………………………. 40,000
Stock Investments
Debt Investments
Mar. 1 20,300
Dec. 31 Bal. 0
Feb. 1 30,800
Aug. 1 18,480
Apr. 1 40,000
Oct. 1 40,000
PROBLEM 16-2B (Continued)
(b) Dec. 31 Unrealized Loss—Income ………………….. 2,020
Fair Value Adjustment—Trading ….. 2,020
Cost
Fair Value
$12,320
$13,200
(200 X $66)
(c) Current assets
Trading securities, at fair value …………………………………. $30,600
(d)
Income Statement Account
Category
Dividend Revenue
Other revenues and gains
Gain on Sale of Stock Investments
Other revenues and gains
Interest Revenue
Other revenues and gains
Gain on Sale of Debt Investments
Other revenues and gains
Unrealized Loss—Income
Other expenses and losses
PROBLEM 16-3B
(a) 2017
July 1 Cash (5,000 X $1) ……………………………….. 5,000
Dividend Revenue ……………………….. 5,000
Aug. 1 Cash (4,000 X $.50) …………………………….. 2,000
Dividend Revenue ……………………….. 2,000
Nov. 1 Cash (3,000 X $1) ……………………………….. 3,000
Dividend Revenue ……………………….. 3,000
Stock Investments
2017
Jan. 1 Balance 190,000
2017
Sept. 1 9,000
Oct. 1 15,000
Dec. 31 Balance 166,000
PROBLEM 16-3B (Continued)
(b) Dec. 31 Unrealized Gain or Loss—Equity
Security
Cost
Fair Value
Woolridge Co. common
$ 85,000
$ 78,200
(3,400 X $23)
(c) Investments
Investments in stock of less than
20% owned companies, at fair
value …………………………………………. $ 159,700
Stockholders’ equity
Common stock ……………………………… $2,000,000
PROBLEM 16-4B
(a) 2017
Jan. 1 Stock Investments ………………………. 1,100,000
Cash ……………………………………. 1,100,000
June 30 Cash ………………………………………….. 20,000
Dividend Revenue
(40,000 X $.50) ………………….. 20,000
(b) 2017
Jan. 1 Stock Investments ………………………. 1,100,000
Cash ……………………………………. 1,100,000
June 30 Cash ………………………………………….. 20,000
Stock Investments ……………….. 20,000
PROBLEM 16-4B (Continued)
(c)
Cost Method
Equity
Method
Stock Investments
Unrealized gain—equity
$1,200,000*
100,000
$1,180,000**
0
PROBLEM 16-5B
(a) Jan. 7 Cash (700 X $55) ………………………………….. 38,500
Stock Investments ………………………… 35,000
10 Stock Investments ……………………………….. 23,400
Cash …………………………………………….. 23,400
26 Cash …………………………………………………… 1,035
Dividend Revenue ($1.15 X 900) …….. 1,035
Feb. 2 Cash …………………………………………………… 320
Dividend Revenue ($.40 X 800) ………. 320
July 1 Cash …………………………………………………… 900
Dividend Revenue
($1 X 900) ………………………………….. 900
(b)
Stock Investments
1/1 Bal. 99,400
1/7 35,000
9/1 60,000
12/31 Bal. 125,400
PROBLEM 16-5B (Continued)
(c) Dec. 31 Unrealized Gain or Loss—Equity ………………. 3,000
Fair Value Adjustment—Available-
for-Sale ($125,400 – $122,400) …………. 3,000
Security
Cost
Fair Value
$122,400
(d) Investments
Investments in stock of less than 20% owned
companies, at fair value ……………………………………… $122,400
Stockholders’ equity
PROBLEM 16-6B
MUSSATTO CORPORATION
Balance Sheet
December 31, 2017
Assets
Current assets
Cash …………………………………………………………… $ 210,000
Short-term investments, at fair value ……………. 280,000
Investments
Investment in stock of 20%–50%
owned company, at equity …………………………. 900,000
Property, plant, and equipment
Land …………………………………………….. 780,000
Intangibles
Goodwill ……………………………………………………… 300,000
PROBLEM 16-6B (Continued)
MUSSATTO CORPORATION
Balance Sheet (Continued)
December 31, 2017
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable …………………………………………………………… $ 110,000
Long-term liabilities
Bonds payable, 10%, due 2027 …………………. $ 600,000
Stockholders’ equity
Paid-in capital
Common stock, $5 par value,
500,000 shares authorized,
440,000 shares issued and