PROBLEMSETC

PROBLEM151C
LeClairCompany,whichbeganoperationsin2008,investsitsidlecashintradingsecurities.The
followingtransactionsarefromitsshortterminvestmentsinitstradingsecurities:
2008
Jan.20 Purchased650sharesofVt.TeddyBearat$18pershareplusa$75commission.
Feb.9 Purchased1,800sharesofGreenMountainCoffeeRoastersat$31.25pershareplusa
$280commission.
Oct.12 Purchased100sharesofBen&Jerrysat$8.90pershareplusa$100commission.
2009
Apr.15 Sold650sharesofVt.TeddyBearat$24persharelessa$210commission.
July5 Sold100sharesofBen&Jerrysat$11.25persharelessa$85commission.
22 Purchased3,000sharesofBurlingtonCorp.at$45pershareplusa$178commission.
Aug.19 Purchased1,700sharesofTreyPagePhishingCo.at$4pershareplusa$420
commission.
2010
Feb.27 Purchased1,500sharesofVTCo.at$55pershareplusa$880commission.
Mar.3 Sold3,000sharesofBurlingtonCorpat$35persharelessa$320commission.
June21 Sold1,800sharesofGreenMountainCoffeeRoastersat$30persharelessa$130
commission.
30 Purchased1,000sharesofChamplainCollegeat$26.40pershareplusa$160
commission.
Nov.1 Sold 1,700 shares of Trey Page Phishing Co at $14.75 per share less a $420
commission.
Required
1.Preparejournalentriestorecordtheseshortterminvestmentactivitiesfortheyearsshown.
(Ignoreanyyearendadjustingentries.)
2.OnDecember31,2010,preparetheadjustingentrytorecordanynecessarymarketadjustment
fortheportfoliooftradingsecuritieswhenVTCo.ssharepricewas$56andChamplainCollege
sharepricewas$17.25.(theMarketAdjustmentTradingaccounthasanunadjustedbalanceof
zero.)
PROBLEM152C
Harry Company had no shortterm investments prior to year 2008. It had the following
transactionsinvolvingshortterminvestmentsinavailableforsalesecuritiesin2008.

Jan.1 Purchased500sharesofKFCCo.stockat$18.75pershareplusa$125brokeragefee.
5Purchased2,600sharesofFenderGuitarsstockat$45.50pershareplusa$460
brokeragefee.
Feb.1 Paid$20,000tobuya90dayCertificateofDepositdatedFebruary1,7%interestrate.
Mar.12Purchased10,000sharesofHarleyDavidsonstockat$56pershareplusa$1,200
brokeragefee.
April15 Received$.05persharecashdividendfromKFC.
16 Soldall500sharesofKFCstockat$15lessa$200brokeragefee.
20 Sold1,200sharesofFenderGuitarsstockat$68.25persharelessa$150brokerage
fee.
May5 ReceivedacheckfortheprincipalandinterestfromtheCertificateofDepositthat
maturedonMay2.
June3Receiveda$2.50persharecashdividendontheHarleyDavidsonstockowned.
8 Receiveda$1.20persharecashdividendontheremainingFenderGuitarsshares.

Required
1.Preparejournalentriestorecordtheseprecedingtransactionsandevents.
2.PrepareatabletocomparethecostandmarketvaluesoftheHarrysshortterminvestmentsin
availableforsalesecurities.TheyearendmarketvaluespershareareFenderGuitars,$33.25;
andHarleyDavidson,$57.25.
3.Prepareanadjustingentry,ifnecessary,torecordthemarketadjustmentfortheportfolioof
shortterminvestmentsinavailableforsalesecurities.
AnalysisComponent
4.Explainthebalancesheetpresentationofamarketadjustmentfortheportfolioofshortterm
investmentsinavailableforsalesecurities.
5.HowdotheseshortterminvestmentsaffectHarrys(a)incomestatementforyear2008and
(b)theequitysectionofitsbalancesheetatyearend2008?
PROBLEM153C
CamSecurity,whichbeganoperationsin2008,investsinlongtermavailableforsalesecurities.
Followingisaseriesoftransactionsanndeventsdeterminingitslongterminvestmentactivity.
2008
Feb.12 Purchased1,000sharesofGoodyearTireat$55.50pershareplusa$850commission.
May5 Purchased500sharesofQuakerStateat$23.00pershareplusa$470commission.
Oct.27 Purchased2,300sharesofFordat$82.50pershareplusa$1,080commission.
Dec.31 PersharemarketvaluesforstocksintheportfolioareGoodyearTire,$58.00;Quaker
State,$14.50;Ford,$71.75.

2009
Jan.1 Sold500sharesofQuakerStateat$18.00persharelessa$550commission.
March2 Purchased850sharesofDuralubeat$46.50pershareplusa$365commission.
June23 Purchased3,500sharesofMcDonaldsat$66.00pershareplusa$780commission.
Aug.12 Sold850sharesofDuralubeat$59.00persharelessa$230commission.
Dec.31 PersharemarketvaluesforstocksintheportfolioareGoodyear,$57.25;McDonalds,
$65.00;Ford,$75.75
2010
Jan.6 Purchased1,800sharesofHewlettPackardat$56.00pershareplusa$620commission.
June27 Sold1,000sharesofGoodyearTireat$50.00persharelessan$320commission.
July7 Purchased 2,000 shares of HarleyDavidson at $26.50 per share plus a $875
commission.
Aug.19 Sold2,300sharesofFordat$62.50persharelessa$850commission.
Nov.22 Sold3,500sharesofMcDonaldsat$78.50persharelessa$420commission.
Dec.31 Per share market values for stocks in the portfolio are HarleyDavidson, $28.75;
HewlettPackard,$61.50.
Required
1.Preparejournalentriestorecordthesetransactionsandeventsandanyyearendadjustments
neededtorecordthemarketvaluesofthelongterminvestments.
2.Prepareatablethatsummarizesthe (a) totalcost, (b) totalmarketadjustment,and (c) total
marketvalueoftheportfoliooflongterminvestmentsateachyearend.
3.Foreachyear,prepareatablethatshowsthe (a) realizedgainsandlossesand (b) thetotal
unrealizedgainsorlossesateachyearend.
PROBLEM154C
DaytonInc.slongterminvestmentportfolioatDecember31,2007,consistsofthefollowing:
AvailableforSaleSecurities CostMarketValue
35,000sharesofREMcommonstock
$437,500
$421,750
52,000sharesofSTPcommonstock $549,000
$633,650
SVCInc.entersintothefollowinglongterminvestmenttransactionsduringyear2008.

Feb.28Purchased10,000sharesofXTCcommonstockfor$225,000plusabrokeragefeeof
$625.
April1 Sold12,000sharesofREMcommonstockfor$199,350lessabrokeragefeeof$1,040.
July18 Sold52,000sharesofSTPcommonstockfor$471,000lessabrokeragefeeof$1,900.
Nov.30 Purchased26,500sharesofINXScommonstockfor$351,000plusabrokeragefeeof
$800.

ThemarketvaluesofDaytonsinvestmentsatDecember31,2008,are:REM,$299,400;XTC,
$162,500;INXS,$352,650.
Required
1.DeterminewhatamountDaytonshouldreportonitsDecember31,2008,balancesheetforits
longterminvestmentsinavailableforsaleequitysecurities.
2.Prepare any necessary December 31, 2008, adjusting entry to record the market value
adjustmentforthelongterminvestmentsinavailableforsaleequitysecurities.
3.Whatamountofgainsorlossesontransactionsrelatingtolongterminvestmentsinavailable
forsaleequitysecuritiesshouldDaytonreportonitsDecember31,2008,incomestatement?
PROBLEM155C
SheaCement Co.,whichbeganoperating onJanuary4,2008,hadthefolowingsubsequent
transactionsandeventsinitslongterminvestments.
2008
Feb.14 Sheapurchased100,000shares(25%)ofCapitalHillscommonstockfor$2,125,000.
July4 CapitalHilldeclaredandpaidacashdividendof$0.50pershare.
Dec.31 CapitalHillsnetincomefor2008is$105,000,andthemarketvalueofitsstockis
$20.00pershare.
2009
July4 CapitalHilldeclaredandpaidacashdividendof$0.75pershare.
Dec.31 CapitalHillsnetlossfor2009is$44,000,andthemarketvalueofitsstockis$18.00
pershare.
2010
Jan. 2

SheasoldallofitsinvestmentinCapitalHillfor$1,500,000cash.

Part1
AssumethatSheahasasignificantinfluenceoverCapitalHillwithits25%share.
Required
1.PrepareentriestorecordthesetransactionsandeventsforShea.
2.Computethecarrying(book)valuepershareofSheasinvestmentinCapitalHillcommon
stockasreflectedintheinvestmentaccountonJanuary1,2010.
3.Compute the net increase or decrease in Sheas equity from February 14, 2008, through
January2,2010,resultingfromitsinvestmentinCapitalHill.
Part2

AssumethatalthoughSheaowns25%ofCapitalHillsoutstandingstock,circumstancesindicate
thatitdoesnothaveasignificantinfluenceovertheinvestee.
Required
1.PrepareentriestorecordtheprecedingtransactionsandeventsforShea.Also,prepareanentry
datedJanuary2,2010,toremoveanybalancerelatedtothemarketadjustment.
2.ComputethecostpershareofSheasinvestmentinCapitalHillcommonstockasreflectedin
theinvestmentaccountonJanuary1,2010.
3.Compute the change in Sheas equity from February 14, 2008, through January 2, 2010,
resultingfromitsinvestmentinCapitalHill.
PROBLEM156C
AlleghenyCo.,aU.S.corporationwithcustomersinseveralforeigncountries,hadthefollowing
selectedtransactionsfor2008and2009.
2008
Oct.5 Sold merchandise to Olympic of Canada for $125,000 cash. The exchange rate for
Canadiandollarsis$0.645onthisday.
Oct.15SoldmerchandiseoncredittoCaliendoandSonsofMexicoCity.Thepriceof2,600,000
pesosistobepaid60daysfromthedateofthesale.Theexchangerateforpesosis
$0.00875onthisday.
Nov.4 Soldmerchandisefor500,000poundstoWemblyLtd.ofLondon,paymentinfullisto
bereceivedin60days.Theexchangerateforpoundsis$1.887onthisday.
Dec.15 ReceivedCaliendospaymentinpesosforitsOctober15purchaseandimmediately
exchangedthepesosfordollars.Theexchangerateforpesosis$0.00775onthisday.
Dec. 20 Sold merchandise for 1,500,000 yen to Sumito Company, payment in full to be
receivedin30days.Theexchangerateforyenis$0.0092onthisday.
Dec.31 RecordedadjustingentriestorecognizeexchangegainsorlossesonAlleghenysannual
financialstatements.Ratesforexchangingforeigncurrenciesonthisdayfollow:
Pounds(Britain) $2.014
Yen(Japan)
0.0087
Dollars(Canada)
0.625
Pesos(Mexico)
0.00795
2009
Jan.4 ReceivedpaymentfromWemblyLtd.Theexchangerateforpoundswas$2.055.
Jan.19 Received payment from Sumito Company and immediately exchanged the yen for
dollars.Theexchangerateforyenis$0.0090onthisday.
Required

1.PreparejournalentriesforAlleghenytransactionsandadjustingentries(roundamountstothe
dollar).
2.Compute the foreign exchange gain or loss to be reported on Alleghenys 2008 income
statement.
AnalysisComponent
3.WhatactionsmightAlleghenyconsidertoreduceitsriskofforeignexchangegainsorlosses?