CHAPTER 1 SOLUTIONS TO EXERCISES EXERCISES AND PROBLEMS EXERCISES E1.1 E1.1
Invest Investmen mentt in Trading ading Se! Se!rit rities ies
(in millions)
a. $49 + 32 = $81 b. Unrealized gains and losses on trading securities are reported in income. c. Investment in trading securities
81 as!
81
Unrealized losses "income#
32 Investment in trading securities
d. as!
32
% Investment in trading securities &ealized gains "income#
E1."
49 11
Investme Investment nt in Avai#a$#e% ai#a$#e%&'r &'r%Sa %Sa#e #e Se Se!rit !rities ies
a. '!e ()* securities !eld at t!e end o 2%%8 !ave net unrealized gains o $181 million "= $193 , $12#- !ic! are reported in (/I. (/I. '!e unrealized loss on ()* ()* securities or 2%%8 is $44 million. '!ereore $220 million "= "= $181 + $44# in net unrealized gains must !ave occurred in prior ears. b. as! &ealized losses "income#
30 0 Investment in ()* securities
Unrealized gains "(/I#
8 &ealized gains "income#
Solutions Manual, Chapter 1
4%
8
©Cambridge Business Publishers, 2010 1
E1.(
He#d%t'%Mat!rit) Investments
(mortization sc!edule "supports numbers in entries belo# Interest in'me Am'rti/ati'n Investment $a#ane *+, - $eginning *0"23222 4 interest *$eginning $a#ane investment $a#ane in'me 4 am'rti/ati'n 112%1% $0-222-091 12312%1% $2%8-9%4 $41-%9 0-181-490 12312%11 2%-2% 42-4% 0-138-00 12312%12 2%0-00% 44-40% 0-%94-3%0 12312%13 2%3-2 4-228 0-%48-% 12312%14 2%1-923 48-% 0-%%%-%%% anuar 1- 2%1% Investment in 5'6 securities
0-222-091 as!
7ecember 31- 2%1% as!
0-222-091
20%-%%% Investment income Investment in 5'6 securities
7ecember 31- 2%11 as!
2%8-9%4 41-%9
20%-%%% Investment income Investment in 5'6 securities
7ecember 31- 2%12 as!
2%-2% 42-4%
20%-%%% Investment income Investment in 5'6 securities
7ecember 31- 2%13 as!
2%0-00% 44-40%
20%-%%% Investment income Investment in 5'6 securities
7ecember 31- 2%14 as!
2%3-2 4-228
20%-%%% Investment income Investment in 5'6 securities
©Cambridge Business Publishers, 2010 2 Edition
2%1-923 48-%
Advanced Accounting, 1st
as!
0-%%%-%%% Investment in 5'6 securities
E1.+
0-%%%-%%%
Investment in Trading3 A5S and HTM Se!rities "212
In'me statement Investment gains Investment losses Interest income Ba#ane s6eet Assets Investments,trading Investments,()* Investments,5'6
Equity (/I gains "losses#
$ 1%-%%% "2%-%%%#
38%-%%% 4%-%%%
4%-%%%
"211
"21"
$ 20-%%% -8
$ "4%-%%%# -849
01%-%%% 19-22
030-%%% 198-%
"9%-%%%#
30-%%%
(mortization sc!edule or 5'6 investment "supports balances above# Interest in'me Am'rti/ati'n Investment $a#ane *+, - $eginning *Interest in'me % *Beginning $a#ane investment $a#ane 073222 8 am'rti/ati'n 122%11 $194-449 12312%11 $-8 $1-8 19-22 12312%12 -849 1-849 198-%
E1.
E9!it) Met6'd Investment :it6 Inter'm;an) Sa#es and Pr'&its
alculation o 2%1% euit in :s net income; oca,ola:s s!are o :s re ported income "30< $1 million# + &ealized proit on intercompan sales "30< "$%%-%%% > "$%%-%%%1.20### , Unrealized proit on intercompan sales "30< "$0-%%% > "$0-%%%1.20### uit in net income o ntr to record euit in :s net income; Investment in uit in income o
Solutions Manual, Chapter 1
$ 30%-%%% 49-%%% "04-20%# $ 344-0%
344-0% 344-0%
©Cambridge Business Publishers, 2010
E1.7
E9!it) Met6'd Investment :it6 C'st in E-ess '& B''< =a#!e
(nalsis o acuisition cost "not reuired#; (cuisition cost 4%< boo? value cess o air value over boo? value; @atents "4%< $4-%%%-%%%# 'ec!nolog "4%< $1-%%%-%%%# Aoodill
$ 0-%%%-%%% $ 2-4%%-%%% 1-%%-%%% 4%%-%%%
4-4%%-%%% $ %%-%%%
alculation o 2%11 euit in &onco:s net income; &evco:s s!are o &onco:s reported income "4%< $9%%-%%%# , (mortization o patent undervaluation "$1-%%-%%%1%# , (mortization o unreported tec!nolog "$4%%-%%%0# uit in net income o &onco &evco:s entries or 2%11; anuar 1- 2%11 Investment in &onco
$ 3%-%%% "1%-%%%# "8%-%%%# $ 12%-%%%
0-%%%-%%% as!
7uring 2%11 as!
0-%%%-%%% 1%%-%%%
Investment in &onco 7ecember 31- 2%11 Investment in &onco
1%%-%%% 12%-%%%
uit in net income o &onco
E1.>
12%-%%%
E9!it) Met6'd and Ot6er C'm;re6ensive In'me
alculation o 2%12 euit in net income; *!are o reported net income "20< $9%%-%%%# ,(mortization o intangibles "20< $2-%%%-%%%4# uit in net income ournal entries or 2%12; Investment in 'urner
$220-%%% "120-%%%# $1%%-%%%
-%%%-%%% as!
Investment in 'urner
-%%%-%%% 1%%-%%%
uit in income o 'urner as!
1%%-%%% %-%%%
Investment in 'urner
©Cambridge Business Publishers, 2010 ! Edition
%-%%%
Advanced Accounting, 1st
/I
-0%% Investment in 'urner
E1.?
-0%%
E9!it) Met6'd Investment C'st C'm;!tati'n
!anges in t!e investment balance in 2%1%- 2%11- and 2%12; "212 4%< reported net income $ 48%-%%% (mortization o unreported intangibles "4%< $4-%%%-%%%0# "32%-%%%# uit in net income $ 1%-%%% Bess 4%< dividends "8%-%%%# !ange in investment balance $ 8%-%%%
"211 $ %%-%%%
"21" $ 0%-%%%
"32%-%%%# $ 28%-%%% "1%%-%%%# $ 18%-%%%
"32%-%%%# $ 24%-%%% "92-%%%# $ 148-%%%
'otal increase in investment balance = $8%-%%% + $18%-%%% + $148-%%% = $4%8-%%% anuar 2- 2%1% investment cost = $14-%8-%%% > $4%8-%%% = $14-2%%-%%%
E1.@
'int =ent!re
(in millions)
ac! investor reports t!e investment on its 7ecember 31- 2%12 balance s!eet at $2-20%-%%% "= $2-%%%-%%% + 0%< $0%%-%%%#. ac! investor reports euit in t!e Coint venture:s net income at $20%-%%% on its 2%12 income statement. '!e individual assets and liabilities o t!e Coint venture are not reported separatel b t!e venturers.
E1.12 E9!it) Met6'd Investment :it6 Inde&inite Li&e Intangi$#es Severa# ears Later
alculation o 2%11 euit in 'alor:s net income; *aton:s s!are o 'alor:s reported income "20< $20%-%%%# , 7e preciation o plant and euipment "20< $1-8%%-%%%10# uit in net income o 'alor
$ 2-0%% "3%-%%%# $ 32-0%%
Dote; '!ere is no amortization o t!e customer database because its lie is over. '!e euit met!od does not report impairment losses on indeinite lie intangibles.
Solutions Manual, Chapter 1
©Cambridge Business Publishers, 2010 "
*aton:s entries or 2%11; 7uring 2%11 as!
20-%%% Investment in 'alor
20-%%%
7ecember 31- 2%11 Investment in 'alor
32-0%% uit in net income o 'alor
32-0%%
E1.11 Stat!t'r) Merger and St'< Investment *see re#ated E1.12
(in millions) a. urrent assets @lant and euipment ustomer database Erand names Aoodill
1%.% 01.8 .0 1.0 4.2 urrent liabilities Bong,term debt as!
b. Investment in 'alor
1 4% 12
12 as!
12
E1.1" Stat!t'r) Merger
(in millions)
urrent assets @lant and euipment Intangibles Aoodill
1% 4% 20 23 urrent liabilities Bong,term debt as!
©Cambridge Business Publishers, 2010 # Edition
12 3 0%
Advanced Accounting, 1st
PROBLEMS P1.1
Investments in Mar
a. 301% Investment in trading securit (
30%-%%% as!
30%-%%%
31% as! Boss on sale o trading securities "income#
320-%%% 20-%%% Investment in trading securit (
30%-%%%
141% Investment in trading securit E
220-%%% as!
220-%%%
821% Investment in ()* securit 7
10-%%% as!
10-%%%
112%1% Investment in ()* securit
3%%-%%% as!
3%%-%%%
12311% Investment in trading securit E
2-%%% Unrealized gain on trading securities "income#
2-%%%
Unrealized loss on ()* securities "/I#
0%-%%% Investment in ()* securit
Investment in ()* securit 7
10-%%% Unrealized gain on ()* securities "/I#
Solutions Manual, Chapter 1
0%-%%%
10-%%%
©Cambridge Business Publishers, 2010 $
11011 as! &ealized loss on trading securities "income#
230-%%% 1-%%% Investment in trading securit E
4211 as!
202-%%%
213-%%% Investment in ()* securit 7 &ealized gain on ()* securities "income#
Unrealized gain on ()* securities "/I#
19%-%%% 23-%%%
10-%%% &ealized gain on ()* securities "income#
411 Investment in ()* securit )
10-%%%
1%-%%% as!
9111 Investment in trading securit
1%-%%%
4%%-%%% as!
123111 Investment in trading securit
4%%-%%%
1%-%%% Unrealized gain on trading securities "income#
Unrealized loss on ()* securities "/I#
1%-%%%
30-%%% Investment in ()* securit
Unrealized loss on ()* securities "/I#
2%-%%% Investment in ()* securit )
©Cambridge Business Publishers, 2010 % Edition
30-%%%
2%-%%%
Advanced Accounting, 1st
b.
2%1% )inancial *tatements
Ba#ane S6eet3 1"(112 Assets Investments in securities "$220-%%% + 10-%%% + 3%%-%%% + 2-%%% > 0%-%%% + 10-%%%#
$
E9!it) (/I
30-%%% loss "dr#
In'me Statement3 "212 &ealized loss Unrealized gain Det c!ange in income
2%11 )inancial *tatements Ba#ane S6eet3 1"(111 Assets Investments in securities "$92-%%% > 202-%%% > 19%-%%% + 1%-%%% + 4%%-%%% + 1%-%%% > 30-%%% > 2%-%%%#
$
"20-%%%# 2-%%% 2-%%% increase
$
1-310-%%%
E9!it) (/I ">$30-%%% > 10-%%% > 30-%%% > 2%-%%%#
Income *tatement- 2%11 &ealized loss &ealized gain "$23-%%% + 10-%%%# Unrealized gain Det c!ange in income
92-%%%
1%0-%%% loss "dr#
$
"1-%%%# 38-%%% 1%-%%% 31-%%% increase
c. '!e valuation o investments on t!e balance s!eet is t!e same. ac! ear:s net losses reported in (/I on t!e balance s!eet are instead reported on t!e income statement. In 2%11- $10-%%% o t!e realized gain on sale o ()* securities is not reported in income- since it as reported in income in 2%1%. '!e $00-%%% net unrealized loss on ()* securities recognized at ear,end appears on t!e income statement.
Solutions Manual, Chapter 1
©Cambridge Business Publishers, 2010 &
*ummar o gains and losses reported in income "not reuired#;
C#assi&ied as A5S
C#assi&ied as Trading
C6ange in in'me i& A5S se!rities #assi&ied as trading
2%1% income &ealized loss Unrealized gain Unrealized loss !ange in income
$"20-%%%# 2-%%% > $ 2-%%%
$"20-%%%# 42-%%% "0%-%%%# $"33-%%%#
$"30-%%%#
2%11 income &ealized loss &ealized gain Unrealized loss Unrealized gain !ange in income
$"1-%%%# 38-%%% > 1%-%%% $ 31-%%%
$"1-%%%# 23-%%% "00-%%%# 1%-%%% $"39-%%%#
$"%-%%%#
E classiing t!e loss securities as ()*- t!e compan delas reporting t!e losses in income until t!e securities are sold.
P1."
He#d%t'%Mat!rit) Inter'r;'rate De$t Investments
a.
Eond F1 pas $%-%%% per ear in interest and $1-%%%-%%% at maturit.
Cas6 &#': $%-%%% $%-%%% $%-%%% $%-%%% $1-%%-%%% 'otal price
Present va#!e a#!#ati'n $%-%%%1.%0 $%-%%%"1.%0#2 $%-%%%"1.%0#3 $%-%%%"1.%0#4 $1-%%-%%%"1.%0#0
Present va#!e $ 0-143 04-422 01-83% 49-32 83%-038 $1-%43-290
Eond F2 pas $2%-%%% per ear in interest and $0%%-%%% at maturit. Cas6 &#': $2%-%%% $2%-%%% $2%-%%% $02%-%%% 'otal price
Present va#!e a#!#ati'n $2%-%%%1.%0 $2%-%%%"1.%0#2 $2%-%%%"1.%0#3 $02%-%%%"1.%0#4
©Cambridge Business Publishers, 2010 10 Edition
Present va#!e $ 19-%48 18-141 1-2 42-8%0 $ 482-21
Advanced Accounting, 1st
(mortization tables to support ansers to reuirements b- c and d; Eond F1 Interest in'me *, - $eginning investment $a#ane
112%1% 12312%1% 12312%11 12312%12 12312%13 12312%14
Am'rti/ati'n *0723222 4 interest in'me
$02-10 01-3 01-32 0%-93% 0%-40
$-830 8-22 8-38 9-%% 9-020
Investment $a#ane *$eginning $a#ane 4 am'rti/ati'n $1-%43-290 1-%30-4% 1-%2-233 1-%18-090 1-%%9-020 1-%%%-%%%
Eond F2 Interest in'me *, - $eginning investment $a#ane
112%1% 12312%1% 12312%11 12312%12 12312%13
Am'rti/ati'n *interest in'me > 0"23222
$24-114 24-319 24-030 24-1
$4-114 4-319 4-030 4-1
Investment $a#ane *$eginning $a#ane 8 am'rti/ati'n $482-21 $48-380 49%-%4 490-239 0%%-%%%
b. Eond F1 Eond F2 'otal interest income
"212 $ 02-10 24-114 $ -29
"211 $ 01-3 24-319 $ -%92
c. $1-%18-090 + $490-239 = $1-013-834 d. U.*. A((@ indicates t!at t!ere must be an Got!er t!an temporarH decline in t!e value o t!e securit- ma?ing it improbable t!at t!e bond issuer ill be able to ma?e t!e remaining interest and principal paments per t!e bond agreement. )actors indicating impairment loss relate to t!e inancial !ealt! o t!e bond issuer- suc! as ailure to ma?e pa ments on ot!er debts and a signiicant decline in credit rating. '!e 7ecember 31- 2%13 carring value or t!e $1-%%%-%%% bond is $1-%%9-020. '!e impairment loss is $0%9-020- reported in income.
Solutions Manual, Chapter 1
©Cambridge Business Publishers, 2010 11
P1.(
He#d%t'%Mat!rit) Inter'r;'rate De$t Investment3 Im;airment L'sses
a. Impairment loss
1-1%%-%%% Investments in 5'6 securities
1-1%%-%%%
'!e loss appears on 5ansen:s income statement. b. )ind t!e interest rate t!at solves t!e olloing euation- !ere $10-%%% = 0< $3-0%%-%%%; $2-4%%-%%% = $10-%%%"1.# + $10-%%%"1.#2 + $3-0-%%%"1.#3 = 2%< c. Interest revenue or 2%%8 = 2%< $2-4%%-%%% = $48%-%%% as! Investments in 5'6 securities
10-%%% 3%0-%%% Interest revenue
48%-%%%
7ecember 31- 2%%8 investment balance; $2-4%%-%%% + $3%0-%%% = $2-%0-%%% d. Impairment reversals are not reported- per U.*. A((@.
P1.+
E9!it) Met6'd Investment Severa# ears a&ter A9!isiti'n
a.
alculation o 2%12 euit in net income
Eetter Eottlers: net income "40< $2-0%%-%%%# , (mortization o patents and trademar?s revaluation "40< "$1%-%%%-%%%1%## , (mortization o brand names "40< "$9-%%%-%%%10## uit in net income o Eetter Eottlers Eest Eeverages: Cournal entries or 2%12; Investment in Eetter Eottlers uit in net income o Eetter Eottlers as! "40< $0%-%%%#
$ 1-120-%%% "40%-%%%# "2%-%%%# $ 4%0-%%%
4%0-%%% 4%0-%%% 292-0%%
Investment in Eetter Eottlers ©Cambridge Business Publishers, 2010 12 Edition
292-0%% Advanced Accounting, 1st
b. Investment balance- anuar 2- 2%%9 + 40< 2%%9 to 2%12 reported income less dividends "40< "$20-%%%-%%% > $13-%%%-%%%## > 4 ears o revaluation rite,os; $40%-%%% 4 $2%-%%% 4 Investment balance- 7ecember 31- 2%12
P1.
$ 3%-%%%-%%% 0-4%%-%%% "1-8%%-%%%# "1-%8%-%%%# $ 32-02%-%%%
E9!it) Met6'd Investment Severa# ears a&ter A9!isiti'n
a. "alculation o euit in net income or 2%1%,2%11 provided in addition to 2%12:s calculationor use in reuirement c.# uit in net income calculation 3%< *eaa:s net income Jrite,o o @K revaluation "3%< $4-%%%-%%%1% eac! ear# (mortization o intangibles "3%< $-%%%-%%%2 or 2%1% and 2%11 onl# 2%11 ending inventor proit- upstream "3%< "$920-%%% > $920-%%%1.20## 2%11 ending inventor proit- donstream "3%< "$42%-%%% > $42%-%%%1.2## 2%12 ending inventor proit- upstream "3%< "$20-%%% > $20-%%%1.20## 2%12 ending inventor proit- donstream "3%< "$9-%%% > $9-%%%1.2## uit in net income b. Investment in *eaa
"212%"211 $ 4-2%%-%%%
"21" $1-2%%-%%%
24%-%%%
12%-%%%
"1-8%%-%%%# "00-0%%#
00-0%%
"21-%%%#
21-%%% "3-0%%#
LLLLLLL $ 2-03-0%%
1-324-2%% uit in income o *eaa
Unrealized loss "/I#
1-324-2%% 24%-%%%
Investment in *eaa as!
24%-%%% 40%-%%%
Investment in *eaa
Solutions Manual, Chapter 1
"34-8%%# $ 1-324-2%%
40%-%%%
©Cambridge Business Publishers, 2010 1
c. Investment- anuar 1- 2%1% + uit in net income- 2%1%,2%11 + Unrealized gains on ()* securities- 2%1%,2%11 "3%< $1 million# > 7ividends- 2%1%,2%11 "3%< $0 million# + uit in net income- 2%12 > Unrealized losses on ()* securities- 2%12 "3%< $8%%-%%%# > 7ividends- 2%12 "3%< $1.0 million# Investment- 7ecember 31- 2%12
P1.7
$ 1%-%%%-%%% 2-03-0%% 3%%-%%% "1-0%%-%%%# 1-324-2%% "24%-%%%# "40%-%%%# $ 11-99-%%
E9!it) Met6'd Investment :it6 Severa# Assets in E-ess '& B''< =a#!e
a. ambridge !as $0%%-%%%$%.0% = 1-%%%-%%% s!ares outstanding 4%< 1-%%%-%%% = 4%%-%%% s!ares acuired b. alculation o 2%11 euit in net income (in thousands) ambridge:s net income "4%< $1-%%%# $ 4%% (dCusted or Eirming!am:s s!are o revaluation rite,os; > (dditional cost o goods sold "4%< $3%%# "12%# + 7e preciation on revaluation o @K "4%< $4%%2%# 8 > (mortization o ranc!ises "4%< "$1-3%%0## "1%4# uit in ambridge net income $ 184 Dote; Eecause ambridge uses )I)/- t!e beginning inventor is completel sold during t!e ear.
P1.>
E9!it) Met6'd Investment3 Inter'm;an) Sa#es
(in thousands)
a. *ince none o t!e merc!andise !as been sold to outside parties- all intercompan proits are unconirmed. alculation o 2%12 euit in net income; ac?son:s net income "4%< $3%-%%%# > Unconirmed proit on donstream ending inventor "$0-%%% > "$0-%%%1.3## 4%< > Unconirmed proit on upstream ending inventor "$04-%%% > "$04-%%%1.30## 4%< uit in ac?son:s net income ©Cambridge Business Publishers, 2010 1! Edition
$ 12-%%% "-%%%# "0-%%# $ 4%%
Advanced Accounting, 1st
b.
*ales revenue ost o sales Aross mar gin Aross margin <
Har
a
$ 24-%%% 229-%%% $ 30-%%% 13<
$ 21%-%%% 189-%%% $ 21-%%% 1%<
Eot! corporations report !ig!er gross margins as a percent o sales !en t!e include intercompan transactions. /ne could easil ma?e t!e argument t!at t!ese intercompan sales distort t!e 2%12 inancial results- since pricing to outside customers onl ac!ieves a 9< or 1%< gross margin on sales- !ile 5arc?er:s sales to ac?son ac!ieve a 23< margin M = "$0-%% % > 0%-%%%#$0-%%%N and ac?son:s sales to 5arc?er ac!ieve a 2< margin M = "$04-%% % > 4%-%%%# $04-%%%N. '!e euit met!od removes t!e investor:s s!are o unconirmed gross proits on upstream and donstream merc!andise sales in t!e euit met!od income accrual- but does not adCust eac! compan:s reported sales and cost o sales or intercompan transactions. Dote to instructor; '!is problem provides an introduction to elimination o unconirmed intercompan proits in consolidation- covered in !apter .
P1.?
E9!it) Investments3 =ari'!s Re;'rting Met6'ds
(in thousands) a. Ba#ane S6eet3 Deem$er (13 "212 urrent assets $ 38-%%1 @ropert- net 40%-%%% Investment in Ouarr "()*# 1-2%% Identiiable intangibles 0-%%% LLLLL 'otal assets $ 494-8%% "212 In'me Statement *ales revenue Investment income ost o sales /perating epenses Det income 1 $38-%% = $4%-%%% > $1-0%% + $1%%
Solutions Manual, Chapter 1
urrent liabilities Bong,term liabilities apital stoc? &etained earnings (/I 'otal liabilities and euit
$
2%-%%% 2%%-%%% 9%-%%% 180-1%% "3%%# $ 494-8%%
$ 9%%-%%% 1%% "0%-%%%# "14%-%%%# $ 1%-1%%
©Cambridge Business Publishers, 2010 1"
b. Ba#ane S6eet3 Deem$er (13 "212 urrent assets $ 34-4%%1 @ropert- net 40%-%%% Investment in Ouarr -8%%2 Identiiable intangibles 0-%%% 'otal assets $ 49-2%%
urrent liabilities Bong,term liabilities apital stoc? &etained earnings 'otal liabilities and euit
"212 In'me Statement *ales revenue uit in income o Ouarr ost o sales /perating epenses Det income 1 $34-4%% = $4%-%%% > $-%%% + $4%% 2 $-8%% = $-%%% + "4%< $3-%%%# , "4%< $1-%%%#
c. Ba#ane S6eet3 Deem$er (13 "212 urrent assets $ 31-%%%1 @ropert- net 030-%%% Identiiable intangibles 0-%%% Aoodill 11-%%%2 'otal assets $ 082-%%%
2%-%%% 2%%-%%% 9%-%%% 18-2%% $ 49-2%%
$ 9%%-%%% 1-2%% "0%-%%%# "14%-%%%# $ 11-2%%
urrent liabilities Bong,term liabilities apital stoc? &etained earnings 'otal liabilities and euit
"212 In'me Statement *ales revenue ost o sales /perating epenses Det income
$
$
23-%%% 281-%%% 9%-%%% 188-%%%3 $ 082-%%%
$ 9%-%%% "%-%%%# "1-%%%# $ 13-%%%
1
$31-%%% = $4%-%%% > $10-%%% + $0-%%% + $1-%%% "dividends# $11-%%% = $10-%%% > $4-%%% 3 $188-%%% = $180-%%% + $3-%%% 2
©Cambridge Business Publishers, 2010 1# Edition
Advanced Accounting, 1st
P1.@
'int =ent!re3 =ari'!s Re;'rting Met6'ds
(in millions)
A##en C'r; $ .201 21%.%% > 220.%% $ 442.20
urrent assets @lant and euipment- net Investment in (lbarcol nterprises Intangibles 'otal assets urrent liabilities Doncurrent liabilities apital stoc? &etained earnings 'otal liabilities and euit
24.20 34%.%% 1%.%% 8.%%2 $ 442.20
Bar<#e) C'r; $ %.4 0.% 4.23 0.% $ 4.
$
C'##ins C'r; $ %. 42.% 1.0 > $ 44.1
$
%.2 00.% 1.% 18.44 $ 4.
$
%.8 3%.% 0.% 8.3 $ 44.1
1
$.20 = $1 + M0%< "$%.0 + $12#N $8 = $ + "0%< $2# 3 $4.2 = $3.0 + "30< $2# 4 $18.4 = $1. + "30< $2# 2
Dote to instructor; (lbarcol reported net income o $2 in 2%12P $2 = $12 ending euit balance , $1% original investment
P1.12 Ba#ane S6eet a&ter B!siness A9!isiti'n Fi#s'n C'r;'rati'n Ba#ane S6eet
(in millions) Assets urrent assets @ropert and euipment Intangibles Aoodill
'otal assets
$
2% 00 49 131
LLL $ 4
Lia$i#ities urrent liabilities Bong,term debt 'otal liabilities E9!it) apital stoc? &etained earnings (/I 'otal euit 'otal liabilities and euit
$
2 40 $ 492 $
0% 12% "10# $ 100 $ 4
1
$13 = $40 > "$12 + $10 + $4# + $20 > $1 > $9
Solutions Manual, Chapter 1
©Cambridge Business Publishers, 2010 1$
P1.11 B!siness A9!isiti'n
( in thousands) as! and receivables Inventor @lant and euipment /t!er tangible assets 7istribution relations!ips 'rademar?s- coprig!ts and brands /t!er identiiable intangible assets Aoodill
4 142 21 131 10 834 1-91 1-329 (ccounts paable as! ommon stoc?
8 39 4-044
P1.1" 'int =ent!re Re;'rting3 I5RS
(all dollar amounts in millions) a. $2-%22 , $1-1% = $910$2-10 = 30< or $18$032 = 30<
b. ac! account balance is calculated as @epsio:s balance plus 30< @EA:s balance- ecept or goodill and euit. Ba#ane S6eet urrent assets $ 11-231 /t!er noncurrent assets 20-90 Aoodill 1-1% 'otal assets $ 38-3%3 Biabilities $ 21-%9 uit 1-234 'otal liabilities and euit $ 38-3%3 In'me Statement &evenues $ 44-231 ost o goods sold "2%-18# /perating epenses "1-900# Det income $ 0-08 c. E9!it) Met6'd Pr';'rti'nate C'ns'#idati'n Biabilities to assets $1-394$34-28 = 0%< $21-%9$38-3%3 = 00< Biabilities to euit $1-394$1-234 = 1%1< $21-%9$1-234 = 122< @EA is more !ig!l leveraged t!an @epsio. J!en a proportion o its liabilities are aggregated it! t!ose o @epsio- @epsio loo?s more leveraged. ©Cambridge Business Publishers, 2010 1% Edition
Advanced Accounting, 1st
