Exercise C-16A (25 minutes)
Quarter ended June 30, 2016
May 8 recorded amount (800,000 x $0.1323) ………………….
$105,840
June 30 balance sheet amount (800,000 x $0.1352) ………..
Quarter ended September 30, 2016
June 30 balance sheet amount ……………………………………..
$108,160
Sept. 30 balance sheet amount (800,000 x $0.1368) ……….
Quarter ended December 31, 2016
Sept. 30 balance sheet amount ……………………………………..
$109,440
Dec. 31 balance sheet amount (800,000 x $0.1335) ………..
Quarter ended March 31, 2017
Dec. 31 balance sheet amount ……………………………………..
$106,800
Feb. 10, 2017, amount received (800,000 x $0.1386) ………
Exercise C-17 (15 minutes)
1. Accounting for available–for-sale securities (and as explained in
PROBLEM SET A
Problem C-1A (60 minutes)
Part 1
2016
20,925
Short-Term Investments—Trading (Ford) ……………..
Feb. 9
Short-Term Investments—Trading (Loews) ……..
97,928
Short-Term Investments—Trading (Z-Seven) …….
Fair Value Adjustment—Trading (ST)………………
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2016—F.V. Adj—Trading
Unadj.
0
Adj.
End.
Problem C-1A (Continued)
2017
Apr. 15
Cash …………………………………………………………….
22,915
Cash …………………………………………………………….
48,444
Aug. 19
33,140
Dec. 31
Unrealized Loss—Income ……………………………..
24,834
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2017—F.V. Adj—Trading
Problem C-1A (Concluded)
2018
116,020
Mar. 3
Cash …………………………………………………………….
39,750
June 21
Cash …………………………………………………………….
91,980
June 30
57,595
Nov. 1
Cash …………………………………………………………….
32,541
Dec. 31
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2018—F.V. Adj—Trading
Adj.
End.
Problem C-2A (40 minutes)
Part 1
2016
Aug. 15
Cash ………………………………………………………………………….
3,400
3,400
3,800
2,100
2,100
2,600
2,600
Problem C-2A (Continued)
Part 2
Comparison of Cost and Fair Values for AFS Portfolio
Unrealized
Cost Fair Value Gain (Loss)
Gem Co. (2,000 x $24.25) + 90a …………… $ 48,590
Part 3
Dec. 31
Unrealized Loss⎯Equity …………………………………………
4,470
Part 4
The balance sheet would report the cost of these short-term investments in
Part 5
(a) Income statement
Problem C-3A (60 minutes)
Part 1
2016
Dec. 31
Unrealized Loss⎯Equity ……………………………………….
3,650
Problem C-3A (Continued)
2017
Apr. 15
Cash …………………………..………………………………………………….
22,975
Cash …………………………..………………………………………………….
35,615
July 22
13,980
Aug. 19
15,498
Dec. 31
Unrealized Loss⎯Equity ………………………………………………..
10,168
Problem C-3A (Continued)
2018
Feb. 27
Long-Term Investments—AFS (Microsoft) …………………………..
161,325
Cash ……………………………………………………….…………………….
56,720
1,055
55,665
Long-Term Investments—AFS (Black & Decker) ……………………
50,835
50,835
Aug. 3
Cash ……………………………………………………….…………………….
9,315
Loss on Sale of Investments …………………………..
4,665
13,980
Nov. 1
Cash ……………………………………………………….…………………….
19,850
Dec. 31
Fair Value Adjustment—AFS (LT)* …………………………..
21,858
Problem C-3A (Concluded)
Part 2
12/31/2016
12/31/2017
12/31/2018
Part 3
2016
2017
2018
Realized gains (losses)
Sale of Johnson & Johnson shares …….
$ 2,235
Total realized gain (loss) ………………………
Problem C-4A (30 minutes)
Part 1
1. Journal entries (assuming significant influence)
2016
Jan. 5
Long-Term Investments—Kildaire …………………………..
1,560,000
1,560,000
Long-Term Investments—Kildaire …………………………..
2017
Long-Term Investments—Kildaire …………………………..
2018
Jan. 2
1,894,000
1,740,000
Problem C-4A (Continued)
2. Carrying value per share, January 1, 2018 (see computations in part 1)
Part 2
1. Journal entries (assuming NO significant influence)
2016
Oct. 23
Cash …………………………..………………………………………………….
192,000
Dec. 31
240,000
2017
Oct. 15
Cash …………………………..………………………………………………….
156,000
156,000
Dec. 31
120,000
120,000
Problem C-4A (Concluded)
2018
2. Investment cost per share, January 1, 2018
3. Change in Selk’s equity due to stock investment
Problem C-5A (40 minutes)
Part 1
Available–for-sale securities on December 31, 2016
Security
Cost
Fair Value
3,500 shares of Company B common stock …………..
$ 79,690
$ 81,375
4,500 shares of Company X common stock …………..
8,500 shares of Company Z common stock …………..
270,350
Disclosure
Part 2
Unrealized Loss—Equity …………………………..
* December 31, 2015, available-for-sale securities
Cost _
Fair Value
$ 535,300
$ 490,000
December 31, 2016, adjustment to the Fair Value Adjustment account:
$ 20,002 Dr. to adjust cost to fair value
Part 3
Only gains or losses realized on the sale of available-for-sale securities
appear on the 2016 income statement. Unrealized gains or losses appear
in the equity section of the balance sheet.
Year 2016 realized gains (losses)
Stock Sold
Cost
Sale
Gain (Loss)
Problem C-6AA (60 minutes)
Part 1
2016
Apr. 8
Cash …………………………..………………………………………………….
5,938
Sales ……………………………………………………….
5,938
Sales ……………………………………………………….
Sales ……………………………………………………….
Nov. 18
Cash …………………………..………………………………………………….
13,800
Foreign Exchange Loss …………………………..……………………..
Sales ……………………………………………………….
7,652
Foreign Exchange Gain * …………………………..
Dec. 31
Foreign Exchange Loss* …………………………………………………
77
Cash* ……………………………………………………………………………..
27,928
Foreign Exchange Gain …………………………..
Cash* ……………………………………………………………………………..
7,514
Foreign Exchange Loss ………………………………………………….
61
Problem C-6AA (Continued)
Part 2
Foreign exchange loss reported on the 2016 income statement
November 18 …………………………………
$(300)
December 31………………………………….
December 31………………………………….
Part 3
To reduce the risk of foreign exchange gain or loss, Doering could attempt
to negotiate foreign customer sales that are denominated in U.S. dollars.
To accomplish this, Doering might be willing to offer favorable terms, such
PROBLEM SET B
Problem C-1B (60 minutes)
Part 1
2016
Mar. 10
Short-Term Investments—Trading (AOL) ……………….
143,505
May 7
Short-Term Investments—Trading (MTV) …………..
184,105
Sept. 1
Short-Term Investments—Trading (UPS) …………..
69,950
Dec. 31
Unrealized Loss—Income ……………………………….
17,560
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2016—F.V. Adj—Trading
Unadj.
0
Adj.
End.
Problem C-1B (Continued)
2017
Apr. 26
Cash ……………………………………………………………..
170,450
Loss on Sale of Short-Term Investments ………..
13,655
184,105
Apr. 27
Cash ……………………………………………………………..
70,812
69,950
June 2
622,450
622,450
June 14
Short-Term Investments—Trading (W-M) ………….
46,307
46,307
Dec. 31
Fair Value Adjustment—Trading (ST) ……………..
33,298
33,298
We could also use a T-account to determine the needed adjustment to fair value:
12/31/2017—F.V. Adj—Trading
Adj.
End.
Problem C-1B (Concluded)
2018
88,890
88,890
Cash ………………………………………………………………
602,760
19,690
Aug. 22
Cash ………………………………………………………………
133,720
62,430
62,430
Oct. 9
Cash ………………………………………………………………
47,155
46,307
Dec. 31
Unrealized Loss—Income ……………………………….
27,058
27,058