(10-15 min.) E 8-29A
German Subsidiary:
EUROS
EXCHANGE
RATE
DOLLARS
Assets
650,000
$1.326
$861,900
Liabilities
300,000
1.326
$397,800
Stockholders’ equity:
Common stock
55,000
1.06
58,300
Retained earnings
295,000
1.19
351,050
Accumulated other
comprehensive income:
(15-20 min.) E 8-30A
Req. 1
Honey Bakery
Statement of Cash Flows (partial)
Fiscal Year 2016
Millions
Cash flows from investing activities:
Capital expenditures ………………………………………………
$(10.0)
Sale of property, plant, and equipment …………………….
7.3
Sale of other businesses ………………………………………..
1.4
Purchase of long-term investments …………………………
(11.5)
Sale of long-term investments …………………………………
Net cash (used) in investing activities …………………..
(20-25 min.) E 8-31A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash ……………………………………………
3,116,000
Notes Receivable …………………..
3,116,000
Short-Term Investments ………………..
3,465,000
Cash ……………………………………..
3,465,000
Cash …………………………..………………..
1,409,000
Accumulated Depreciation—Equip. ..
3,691,000
Equipment …………………………….
5,100,000
Cash …………………………..………………..
Investments …………………………..
Gain on Sale of Investments …..
Property and Equipment ………………..
Cash ……………………………………..
(5–10 min.) E 8-32A
$9,395.29 EXCEL formula =PV(3.5%,16,-300,-10000,0)
(15-20 min.) E 8-33B
Req. 1
Baytex should use the amortized–cost method to account for the long-
term investment in bonds.
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Sept.
30
Held-to-Maturity Investment in Bonds
($46,000 × .97) ……………………………………….
44,620
Cash …………………………………………………
44,620
To purchase bond investment.
Dec.
31
Interest Receivable ($46,000 × .05 × 3/12) ……
575
Interest Revenue ……………………………….
575
To accrue interest revenue.
31
Held-to-Maturity Investment in Bonds
Interest Revenue ……………………………….
69
To amortize discount on bond investment.
Req. 3
Balance sheet (partial)
ASSETS
Current:
Interest receivable …………………………………………………
$ 575
(10-15 min.) E 8-34B
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
a.
Investment in AFSS (410 × $31) ………………………..
12,710
Cash …………………………………………………………..
12,710
b.
Cash (410 × $1.10) ……………………………………………
451
Dividend Revenue ……………………………………….
451
c.
Allowance to Adjust Investment in AFSS
to Market [410 × ($36 − $31)] …………………………….
2,050
Unrealized Gain on Investment in AFSS ……….
2,050
Unrealized Gain on Investment in AFSS ……………
Cash (410 × $27) ………………………………………………
11,070
Loss on Sale of Investment in AFSS …………………
Investment in AFSS …………………………………….
12,710
(15-25 min.) E 8-35B
Req. 1
Stock
Cost
Fair Value
Dublin
(2,800 × $35)
=
$ 98,000
(2,800 × $28.125)
=
$ 78,750
Chile
(590 × $45.50)
=
26,845
(590 × $48.00)
=
28,320
Russian
=
=
Total ……………………………………..
…………………………
Req. 2
Dec. 31
Unrealized Loss on Investments in
AFSS ($194,845 − $170,320) ………………..
24,525
Allowance to Adjust Investments in
AFSS to Market …………………………..
24,525
Req. 3
Statement of Comprehensive Income (partial):
Other comprehensive income:
Unrealized (loss) on investments in AFSS …………..
$ (24,525)
Balance Sheet (partial):
Investments in AFSS ……………………………………………..
Accumulated other comprehensive income:
Unrealized (loss) on investments in AFSS …………..
$ (24,525)
(10-15 min.) E 8-36B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
a.
Equity-Method Investment ……………………….
1,300,000
Cash …………………………………………………..
1,300,000
Purchased equity-method investment.
b.
Equity-Method Investment ($680,000 × .30) .
204,000
Equity-Method Investment Revenue …….
204,000
To record investment revenue.
c.
Cash ($450,000 × .30) ………………………………
135,000
Equity-Method Investment …………………..
To receive cash dividend on equity-method investment.
(10-15 min.) E 8-37B
Equity-Method Investment
a.
Purchase
1,300,000
c.
Dividends
135,000
b.
Net income
204,000
Balance
1,369,000
(15-20 min.) E 8-38B
Req. 1
Req. 2
Balance sheet (partial):
ASSETS
Long-term assets:
Equity-method investment ……………………………………..
$626,250*
Income statement (partial):
Other revenue
Equity-method investment revenue ………………………..
$117,000
_____
*Explanation:
Equity-Method Investment
(20-25 min.) E 8-39B
Req. 1 (consolidation work sheet and balance sheet)
Gamma,
Cressida
ELIMINATION
CONSOLIDATED
ASSETS
Inc.
Corp.
DEBIT
CREDIT
BALANCE SHEET
Cash
54,000
14,000
68,000
Accounts receivable, net
80,000
55,000
135,000
Note receivable from Gamma
40,000
Inventory
53,000
84,000
137,000
Plant assets, net
99,000
389,000
Investment in Cressida Corp.
Other assets
24,000
8,000
32,000
Total
599,000
300,000
761,000
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable
46,000
28,000
74,000
Notes payable
154,000
36,000
(b) 40,000
150,000
Other liabilities
78,000
138,000
216,000
Common stock
85,000
(a) 85,000
Retained earnings
208,000
13,000
208,000
Req. 2
The stockholders’ equity of the consolidated entity is $321,000 ($113,000 + $208,000).
(10-15 min.) E 8-40B
Greek Subsidiary:
EUROS
EXCHANGE
RATE
DOLLARS
Assets
600,000
$1.36
$816,000
Liabilities
200,000
1.36
$272,000
Stockholders’ equity:
Common stock
45,000
1.06
47,700
Retained earnings
355,000
1.17
415,350
Accumulated other
comprehensive income:
During this period, the euro was stronger than the dollar. The strong
euro produced the positive translation adjustment.
(15-20 min.) E 8-41B
Req. 1
Ellis Bakery
Statement of Cash Flows (partial)
Fiscal Year 2016
Millions
Cash flows from investing activities:
Capital expenditures ………………………………………………
$ (10.6)
Sale of property, plant, and equipment …………………….
7.5
Sale of other businesses ………………………………………..
1.4
Purchase of long-term investments …………………………
(12.1)
Sale of long-term investments …………………………..…….
Net cash (used) in investing activities …………………..
(20-25 min.) E 8-42B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash ………………………………………………………
3,117,000
Notes Receivable ……………………………….
3,117,000
Short-Term Investments ………………………….
3,460,000
Cash …………………………..…………………….
3,460,000
Cash ………………………………………………………
1,399,000
Accumulated Depreciation–Equipment …….
3,701,000
Equipment …………………………………………
5,100,000
Cash ………………………………………………………
Investments ………………………………………
Gain on Sale of Investments ……………….
Property and Equipment …………………………
Cash …………………………..…………………….
(10-20 min.) E 8-43B
$4,797.23 EXCEL formula =PV(4%,10,-175,-5000,0)
Quiz
Q8–44
c [(800 × $74) + (250 × $13) + (400 × $26) = $72,850]
Q8–45
c [(800 x $2.10) + (250 x $1.30) + (400 x $0.90) = $2,365]
Q8–46
Cash (800 × $74) …………………………………
59,200
Investment in AFSS (800 × $58) ………..
46,400
Gain on Sale of Investment in AFSS ….
12,800
Q8–47
c
Q8-49
a
Q8–50
d ($100,000 × .05) = $5,000
Q8–51
Q8–54
b =PV(4.5%,12,-60,-2000,0)
Problems
(45-60 min.) P 8-56A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Jan.
1
Held-to-Maturity Investment in Bonds
($2,800,000 × 1.12) ………………………………..
3,136,000
Cash ……………………………………………….
3,136,000
To purchase bond investment.
July
1
Cash ($2,800,000 × .09 × 6/12) ……………….
126,000
Interest Revenue ……………………………..
126,000
To receive semiannual interest.
1
Interest Revenue ………………………………….
42,000
Held-to-Maturity Investment in Bonds
[($3,136,000 − $2,800,000) / 48*] x 6 …..
42,000
Req. 2
Oct.
31
Interest Receivable
($2,800,000 × .09 × 4/12) …………………………
84,000
Interest Revenue ………………………………
84,000
To accrue interest revenue.
31
Interest Revenue …………………………………..
Held-to-Maturity Investment in Bonds
[($3,136,000 − $2,800,000) / 48*] x 4 ……
To amortize premium on bond investment.
(continued) P 8-56A
Req. 3
Balance sheet at October 31, 2016:
Current assets:
Interest receivable …………………………..………………..
$ 84,000
Property, plant, and equipment, net ………………………
Income statement for the year ended October 31, 2016:
Other revenues:
Interest revenue ($126,000 − $42,000 + $84,000 − $28,000) ……
$140,000
(20-30 min.) P 8-57A
Req. 1
Current fair value is used to account for the available-for-sale
investment in Columbus, Inc., because the investor expects to sell the
stock at its market value. Fair value is clearly relevant to the investor’s
decisions about this investment.
(continued) P 8-57A
Req. 2
Balance sheet:
ASSETS
Total current assets …………………………………………………..
$ XXX
Property, plant, and equipment, net …………………………...
Investment in AFSS …………………………………………………
STOCKHOLDERS’ EQUITY
Common stock ………………………………………………………….
$ XXX
Retained earnings ……………………………………………………..
XXX
Accumulated other comprehensive income:
Unrealized (loss) on investment in AFSS
[$30,100 − (1,000 × $41.50)] ……………………………………..
(11,400)
Income statement:
Income from operations …………………………………………….
$ XXX
Other revenue:
Equity-method investment revenue ($540,000 × .25)….
Dividend revenue (1,000 × $.33) …………………………..…..
Net income ……………………………………………………………….
Statement of comprehensive income:
Other comprehensive income:
Unrealized (loss) on investment in AFSS ………………….
$ (11,400)
_____
*Equity-Method Investment
Purchase
340,000
Net income ($540,000 × .25)
135,000
Dividends received (18,200×$1.23)
22,386
Balance
452,614
(45-60 min.) P 8-58A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Mar.
16
Investment in AFSS (1,400 × $12.75) ……………
17,850
Cash ………………………………………………..
17,850
Purchased investment.
May
21
Cash (1,400 × $2.25) …………………………..……
3,150
Dividend Revenue …………………………….
3,150
Received cash dividend.
Aug.
17
Cash …………………………..………………………….
90,000
Received cash dividend on equity-method
investment.
Dec.
31
Equity-Method Investment in FUN Software
($530,000 × .20) ……………………………………….
Equity-Method Investment Revenue …..
To record investment revenue.
31
Allowance to Adjust Investment in AFSS
8,350
Unrealized Gain on Investment in AFSS.
8,350
Adjusted investment to market value.
(continued) P 8-58A
Req. 2
Equity-Method Investment
Jan.
1
Balance
610,000
Aug.
17
Dividends
90,000
Dec.
Net income
Dec.
31
Balance
Req. 3
Total current assets ………………………………………………….
$ XXX
Long-term assets:
Investment in AFSS …………………………………………………
26,200
Equity-method investment ……………………………………….
626,000
STOCKHOLDERS’ EQUITY
Accumulated other comprehensive income:
Unrealized gain on investment in AFSS