Solution Manual For Financial Accounting Fifth Canadian Edition 5 e 5th Edition Walter T Harrison T Horngren C William Thomas Greg Berberich Catherine Seguin Download
Solution Manual For Financial Accounting Fifth Canadian Edition 5 e 5th Edition Walter T Harrison T Horngren C William Thomas Greg Berberich Catherine Seguin Download
Solution Manual For Financial Accounting Fifth Canadian Edition 5 e 5th Edition Walter T Harrison T Horngren C William Thomas Greg Berberich Catherine Seguin Download
Short Exercises
(10-15 min.) S 8-1
1.
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Feb. 10 Long-Term Investment (300 × $25) .......... 7,500
Cash ...................................................... 7,500
2.
ASSETS
Total current assets ............................................... $ XXX
Long-term investments, at fair value..................... 7,000
SHAREHOLDERS’ EQUITY
Common shares ..................................................... $ XXX
Retained earnings .................................................. XXX
Accumulated other comprehensive income:
Unrealized (loss) on investments ..................... (500)
2.
Journal
ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
(Millions)
a. Long-Term Investment .................................. 41
Cash ............................................................ 41
To purchase equity-method investment.
3.
Long-Term Investment
(Amounts in millions)
Purchase 41.0 Dividends received 0.8
Net income 2.4
Balance 42.6
(Millions)
Sale proceeds ......................................................... $ 14.0
− Carrying amount of the investment ($42.6 / 2) ..... (21.3)
= (Loss) on sale of investment ................................. $ (7.3)
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
a. Jan. 2 Long-Term Investment in Bonds
($1,000,000 × 1.01) .............................. 1,010,000
Cash ................................................ 1,010,000
To purchase bond investment.
2019
d. Jan. 2 Cash ..................................................... 1,000,000
Long-Term Investment in Bonds ... 1,000,000
To receive face value at maturity.
Req. 2
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Shoppers
Drug Mart (3,000 × $50) = $150,000 (3,000 × $48.05) = $ 144,150
Bank of
Montreal (600 × $42.50) = 25,500 (600 × $31.25) = 18,750
Req. 2
Dec. 31 Other Comprehensive Income 63,560
Long-Term Investment
($306,204 − $242,644)…………..... 63,560
Req. 3
Income Statement (partial):
ASSETS
Long-term investments, at fair value ............. $242,644
SHAREHOLDERS’ EQUITY
Accumulated other comprehensive income:
Unrealized (loss) on investments ................... $ (63,560)
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Req. 2
_____
*
Explanation:
Long-Term Investment
Cost 500,000
Share of net income Share of dividends
($200,000 × 0.25) 50,000 ($100,000 × 0.25) 25,000
Balance 525,000
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Sept. 30 Long-Term Investment in Bonds
($20,000 × 0.91) ............................................. 18,200
Cash .......................................................... 18,200
To purchase bond investment.
During this period, the euro was stronger than the dollar.
The strong euro produced the positive translation
adjustment.
(Millions)
Cash flows from investing activities:
Capital expenditures ........................................... $(10.4)
Sale of property, plant, and equipment ............. 7.3
Sale of other businesses .................................... 1.0
Purchase of long-term investments .................. (12.2)
Sale of investments ............................................. 2.5
Net cash (used) in investing activities ........... $(11.8)
Journal Entry
Cash.......................................................... 3,110,000
Notes Receivable ................................ 3,110,000
Cash.......................................................... 1,409,000
Accumulated Depreciation ..................... 3,691,000
Equipment ............................................ 5,100,000
Cash.......................................................... 461,000
Investments ......................................... 450,000
Gain on Sale of Investments .............. 11,000
You should choose the option with the payments over the five
years rather than the one payment of $100,000. The present value
of the payments, $103,890, is higher than the present value of the
single payment, $100,000.
Req. 2
If the interest rate is 10%, you should choose the one payment of
$100,000 rather than the five payments over five years. The
present value of the single payment, $100,000, is higher than the
present value of the five payments, $90,855.
Req. 2
(Millions)
Accumulated other comprehensive (loss) at
December 31, 2013 .................................................... $(53)
Foreign-currency translation adjustment ................... 29
*Unrealized loss on investments ................................. (16)
Accumulated other comprehensive (loss) at
December 31, 2014 .................................................... $(40)
*
Could also be recorded as Other Income (Loss)
Q8-27 b
Q8-28 c
Q8-29 a
Q8-30 d ($100,000 × 0.07) = $7,000)
Q8-31 b $105,000 × 0.06 = $6,300: $7,000 − $6,300 = $700
Interest income = $7,000 − $700 = $6,300
Q8-32 c
Q8-33 b
Q8-34 d
Q8-35 c
Balance sheet:
ASSETS
Total current assets ..................................................... $ XXX
Long-term investments, at equity ............................... 523,300*
Long-term investments, at fair value .......................... 30,600
Property, plant, and equipment, net ........................... XXX
SHAREHOLDERS’ EQUITY
Common shares ........................................................... $ XXX
Retained earnings ........................................................ XXX
Accumulated other comprehensive income
[$30,600 − (800 × $41.50)].......................................... (2,600)
Income statement:
Income from operations .............................................. $ XXX
Other revenue:
Equity-method investment revenue ($510,000 × 0.35) 178,500
Dividend revenue (800 × $0.30) ................................ 240
Net income .................................................................... XXX
Other comprehensive income.…………………………. (2,600)
_____
*Long-Term Investment in Fellingham Shares
Purchase 370,000
Net income Dividends received
($510,000 × 0.35) 178,500 (20,000 × $1.26) 25,200
Balance 523,300
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Cash.......................................................... 24,500
Purchased investment.
Req. 3
Req. 2
ABC Eliminations Consolidated
ABC Credit Totals
Req. 3
Consolidated debt Total liabilities $233.1
= = = 0.851
ratio of ABC Total assets $273.8
Consolidation of the finance subsidiary increased ABC’s
reported debt ratio from 0.722 to 0.898. Companies would
prefer to report a lower debt ratio, so they would prefer not
to consolidate the financial statements of their financing
subsidiaries when the subsidiary has a high debt load
because that makes their debt ratio appear too high.
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Mar. 1 Long-Term Investment in Bonds
($600,000 × 1.045) ............................. 627,000
Cash .............................................. 627,000
To purchase bond investment.
Flow
1 $10,000 x .893 = $ 8,930
2 8,000 x .797 = 6,376
3 6,000 x .712 = 4,272
$24,000 $19,578
Investment Opportunity B
PV of cash flow = $8,000 x 2.402 = $19,216
Req. 1
EXCHANGE
YEN RATE DOLLARS
Assets 300,000,000 $0.0137 $4,110,000
Balance sheet:
ASSETS
Total current assets ................................................ $ XXX
Long-term investments, at equity .......................... 526,300*
Long-term investments, at fair value .................... 19,200
Property, plant, and equipment, net ...................... XXX
Income statement:
Income from operations ......................................... $ XXX
Other revenue:
Equity-method investment revenue ($350,000 × 0.25) 87,500
Dividend revenue (1,000 × $0.75) ......................... 750
Net income ............................................................... XXX
Other income ...........................................................
(3,300)
_____
*Long-Term Investment in Mars Shares
Purchase 450,000
Net income Dividends received
($350,000 × 0.25) 87,500 (8,000 × $1.40) 11,200
Balance 526,300
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Req. 3
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Jan. 1 Long-Term Investment in Bonds
($500,000 × 0.88) .............................. 440,000
Cash ............................................. 440,000
To purchase bond investment.
Flow
1 $15,000 x .909 = $13,635
2 10,000 x .826 = 8,260
3 5,000 x .751 = 3,755
$30,000 $25,650
Investment Opportunity Y
PV of cash flow = $10,000 x 2.487 = $24,870
EXCHANGE
EUROS RATE DOLLARS
Assets 3,000,000 $1.80 $5,400,000
Req. 2
Req. 2
Telus’s Statement of Cash Flows (investing activities)
indicates that Telus invested $1,847 million in property, plant,
and equipment and had proceeds on derecognition of $4
million during 2011. This investment indicates the company
is expanding its operations. The Balance Sheet shows that
the carrying amount of property, plant, and equipment has
increased in 2011 over 2010. Note 15 of the Notes to the
Consolidated Financial Statements reports the cost,
accumulated depreciation, and the carrying amount. A
comparison of costs in 2011 over 2010 reflects the
investment in equipment reported on the statement of cash
flows.
Chapter 10 Long-Term Investments and International Operations 609
Copyright © 2012 Pearson Canada Inc.
(continued) Telus
Req. 3
Note 1 (k) of the Notes to the Consolidated Financial
Statements indicates the accounting policies for reporting
foreign currency translation. The policy indicates that Telus
has assets, liabilities, and foreign operations in currencies
other than the currency in which the consolidated financial
statements are reported. Gains and losses in foreign
exchange are recorded in the consolidated statements of
earnings (the Income Statement).
Focus on Analysis
Req. 1
Req. 2
Req. 3