Financial Accounting 3e Weygandt Kimmel Kieso

CHAPTER 12 Investments ASSIGNMENT CLASSIFICATION TABLE

Learning Objetives

!"esti#ns

Brie$ E%erises

&# It'

E%erises

A Pr#b(ems

B Pr#b(ems

1.

Disc Discus uss s why why corp corpor orat atio ions ns invest in debt and share securities.

1

2.

Expl Explai ain n the the acco accoun unti ting ng for debt investments.

2, 3, 4

1

1

2, 3

1, 2

1!, 2!

3.

Expl Explai ain n the the acco accoun unti ting ng for share investments.

", #, $, %, &, 1'

2, 3

2

4, ", #, $, %

2, 3, 4, "

2!, 3!, 4!, "!

4.

Desc Descri ribe be the the use use of consolidated financial statements.

11

".

(ndi (ndica cate te how how deb debtt and and share investments are reported in financial statements.

12, 13, 14, 1", 1#, 1$

4, ", #, $, %

3

%, 1', 11, 12

1, 2, 3, ", #

1!, 2!, 3!, "!, #!

#.

Dist Distin ingu guis ish h bet betwe ween en short)term and long)term investments.

1%, 1&

", $, %

4

1', 11, 12

1, 2, 3, ", #

1!, 2!, 3!, "!, #!

Desc Descri ribe be the the for form m and and content of consolidated financial statements as well as how to prepare them.

2', 21

&, 1'

13, 14

$

$!

*$. *$.

N#te)

1

&

ll asteris*e+ +uestion, Exercises, and roblems relate to material contained in the appendix to the chapter.

-opyr -opyrigh ightt  2'1# 2'1# /ohn /ohn 0iley 0iley  ons, ons, (nc. (nc. 0eygan 0eygandt dt ina inanci ncial al ccoun ccountin ting g ( ( 3e 3e oluti olutions ons 5anual 5anual 6or 6or (nstr (nstruct uctor or 7se 8nly9 8nly9

12)1 12)1

ASSIGNMENT CHARACTERISTICS TABLE Pr#b(em N"mber

&esri,ti#n

&i$$i"(tLeve(

Time A((#tte+ .min/0

1

/our /ourna nali li:e :e debt debt inve invest stme ment nt tran transa sact ctio ions ns and and show show financial statement presentation.

5oderate

3';4'

2

/our /ourna nali li:e :e inve invest stme ment nt tran transa sact ctio ions ns,, pre prepa pare re ad
5oderate

3';4'

3

/our /ourna nali li:e :e tran transa sact ctio ions ns and and ad< ad
5oderate

3';4'

4

rep repar are e entr entrie ies s unde underr the the cost cost and and e=ui e=uity ty meth method ods, s, and tabulate differences.

imple

2';3'

"

/our /ourna nali li:e :e shar share e inve invest stme ment nt tran transa sact ctio ions ns and and show show statement presentation.

5oderate

4';"'

#

repare a statement of financial position.

5oderate

3';4'

*$ *$

rep repar are e cons consol olid idat ated ed wor>s or>she heet et and and stat statem emen entt of financial position when cost exceeds boo> value.

imple

3';4'

1!


5oderate

3';4'

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5oderate

3';4'

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5oderate

3';4'

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"!


5oderate

4';"'

#!


5oderate

3';4'

imple

3';4'

*$! *$!


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12)2 12)2

ASSIGNMENT CHARACTERISTICS TABLE Pr#b(em N"mber

&esri,ti#n

&i$$i"(tLeve(

Time A((#tte+ .min/0

1


5oderate

3';4'

2

5oderate

3';4'

3

5oderate

3';4'

4


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5oderate

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#


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3';4'

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3';4'

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3';4'

4!


imple

2';3'

"!


5oderate

4';"'

#!


5oderate

3';4'

imple

3';4'

*$! *$!



12)2 12)2

EGAN&T FINANCIAL ACCO3NTING4 ACCO3NTING4 IFRS E&ITION4 5e CHAPTER 12 IN6ESTMENTS N"mber

LO

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12)3 12)3

IN6ESTMENTS .C#ntin"e+0 N"mber

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BT

&i$$i"(t-

Time .min/0

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3

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2';3'

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?

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-opyright  2'1# /ohn 0iley  ons, (nc. 0eygandt inancial ccounting ( 3e olutions 5anual 6or (nstructor 7se 8nly9

12)4

C#rre(ati#n C9art bet:een B(##m7s Ta%#n#m-4 Learning Objetives an+ En+;#$;C9a,ter E%erises an+ Pr#b(ems Learning Objetive

C#m,re9ensi#n

A,,(iati#n

Ana(-sis

1/ &is"ss :9- #r,#rati#ns invest in +ebt an+ s9are se"rities/

!12;1

E12;1

2/ E%,(ain t9e a#"nting $#r +ebt investments/

!12;2

!12;5 !12;=

BE12;1 &I12;1

E12;2 E12;5

P12;1A P12;2A

P12;1B P12;2B

5/ E%,(ain t9e a#"nting $#r s9are investments/

!12;>

!12;? !12;@ !12; !12;1

!12; BE12;2 BE12;5 &I12;2 E12;=

E12;? E12; E12;> E12;@

P12;2A P12;5A P12;=A P12;?A

P12;2B P12;5B P12;=B P12;?B

=/ &esribe t9e "se #$ #ns#(i+ate+ !12;11 $inania( statements/

E12;

?/ In+iate 9#: +ebt an+ s9are investments are re,#rte+ in $inania( statements/

!12;15

!12;1= !12;1 BE12;= BE12;> BE12;@ E12;@ P12;A P12;B

!12;1? BE12;? BE12; &I12;5 E12;1 E12;11 E12;12 P12;1A

P12;2A P12;5A P12;?A P12;1B P12;2B P12;5B P12;?B

/ &isting"is9 bet:een s9#rt;term an+ (#ng;term investments/

!12;1@ !12;1 &I12;=

BE12;> BE12;@ P12;A P12;B

BE12;? E12;1 E12;11 E12;12 P12;1A P12;2A

P12;5A P12;?A P12;1B P12;2B P12;5B P12;?B

D>/ &esribe t9e $#rm an+ #ntent #$ #ns#(i+ate+ $inania( statements as :e(( as 9#: t# ,re,are t9 em/

!12;2 !12;21

BE12; P12;>A BE12;1 P12;>B E12;15 E12;1=

Br#a+ening #"r Pers,etive

Finania( Re,#rting Rea(;#r(+ F#"s &eisi#n;Ma*ing Ar#ss t9e Organiati#n C#mm"niati#n

!12;12 !12;1>

C#m,arative Ana(-sis

S-nt9esis Eva("ati#n

Et9is Case

ANSERS TO !3ESTIONS 1/

Che reasons corporations invest in securities are 619 excess cash not needed for operations that can be invested, 629 for additional earnings, and 639 strategic reasons.

2/

6a9

5/

6a9 Fosses and gains on the sale of debt investments are computed by comparing the cost of the investment to the net proceeds from the sale. 6b9 Gains and losses are reported in the income statement under other income and expense.

=/

Hol>ata Ftd. is incorrect. Che gain is the difference between the net proceeds, exclusive of interest, and the cost of the bonds. Che correct gain is s4,"'', or I6s4",''' ; s"''9 ; s4','''J.

?/

Che cost of an investment in shares includes all expenditures necessary to ac=uire the investment. Chese expenditures include the actual purchase price plus any commissions or bro>erage fees.

Che cost of an investment in bonds consists of all expenditures necessary to ac=uire the bonds, such as the mar>et price of the bonds plus any bro>erage fees. 6b9 (nterest is recorded as it is earned that is, over the life of the investment in bonds.

B L O O M 7S

T A 8 O N

O M 2 T A B L E

ANSERS TO !3ESTIONS 1/

Che reasons corporations invest in securities are 619 excess cash not needed for operations that can be invested, 629 for additional earnings, and 639 strategic reasons.

2/

6a9

5/

6a9 Fosses and gains on the sale of debt investments are computed by comparing the cost of the investment to the net proceeds from the sale. 6b9 Gains and losses are reported in the income statement under other income and expense.

=/

Hol>ata Ftd. is incorrect. Che gain is the difference between the net proceeds, exclusive of interest, and the cost of the bonds. Che correct gain is s4,"'', or I6s4",''' ; s"''9 ; s4','''J.

?/

Che cost of an investment in shares includes all expenditures necessary to ac=uire the investment. Chese expenditures include the actual purchase price plus any commissions or bro>erage fees.

/

Che entry is

Che cost of an investment in bonds consists of all expenditures necessary to ac=uire the bonds, such as the mar>et price of the bonds plus any bro>erage fees. 6b9 (nterest is recorded as it is earned that is, over the life of the investment in bonds.

hare (nvestments...................................................................................... -ash...................................................................................................

#3,2'' #3,2''

>/

6a9 0henever the investorKs influence on the operating and financial affairs of the associate is significant, the e=uity method should be used. Che ma
@/

ince iing 6M%','''9 should be multiplied by i
/

ignificant influence over an associate may result from representation on the board of directors, participation in policy)ma>ing processes, material intercompany transactions. 8ne must also consider whether the shares held by other shareholders is concentrated or dispersed. n investment 6direct or indirect9 of 2'L;"'L of the voting shares of an associate constitutes significant influence unless there exists evidence to the contrary.


12)#

!"esti#ns C9a,ter 12 6-ontinued9 1/ 7nder the cost method, an investment is originally recorded and reported at cost. Dividends are recorded as revenue. (n subse=uent periods, it is ad
12/ -ompanies classify debt investments into two categories 1. Crading Crading securitie securities s are bought and held primaril primarily y for sale in the near term term to generate income income on short)term price differences. 2. Neld)for)co Neld)for)collect llection ion securities securities are debt securities securities that the investor has the intent and ability ability to hold to maturity. hare investments investments are classified classified either as trading trading or non)trading non)trading securities. securities. hare investments investments have no maturity date and therefore are never classified as held)for)collection securities. hare investments can also be e=uity method investments if ownership is between 2'L and "'L, or consolidated investments if ownership is "'L or more.

15/ Cina should report as follows 619 7nder current current assets assets in the statement statement of financia financiall position position hort) hort)ter term m inves investme tment, nt, at fair fair value.. value..... ...... ...... ...... ...... ...... ...... ...... ....... ........ ........ ........ ........ ........ ........ ........ .... 629 7nder other income income and expense expense in in the income income stateme statement nt 7nreal 7nreali:e i:ed d lossBi lossBinco ncome. me.... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ....... ........ ........ ........ ........ ........ ........ ....... ...

M$','' M$',''' ' M 4,''' 4,'''

1=/ Cina should report as follows 619 7nder investments investments in the the statem statement ent of financ financial ial positi position on (nve (nvest stme ment nts s in in sha share res s of of les less s than than 2'L 2'L owne owned d comp compan anie ies, s, at at fai fairr val value.. ue.. 629 7nder 7nder e=uity e=uity in the the statem statement ent of finan financia ciall positio position n ccumu ccumulat lated ed other other compre comprehen hensiv sive e loss.. loss..... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ....... ........ ....

M$', M$','' ''' ' M 4,''' 4,'''

1?/ Che entry is air air Oalue alue d
1',''' 1','''


1','''

12)$ 12)$

!"esti#ns C9a,ter 12 6-ontinued9 1/ Che entry is air air Oalue alue d
1',''' 1',''' 1','''

7nreali:ed ed FossBE=ui FossBE=uity ty is closed out to the account ccumulated 8ther -omprehensive (ncome. 1>/ 7nreali: Chis account is report as an addition to 6or in the case of on accumulated loss, a deduction from9 e=uity. e=uity. Che unreali:ed loss is not included in the computation of net income.

1@/ eporting 7nreali:ed Gains 6Fosses9BE=uity in the e=uity section by closing it out to ccumulated 8ther -omprehensive (ncome serves two important purposes 619 it reduces the volatility of net income due to fluctuations in fair value, and 629 it still informs the financial statement user of the gain or loss that would would occur if the securities securities were sold at fair value. 1/ ?o. Che investment in Hey Ftd. shares is a long)term investment because there is no intent to convert the shares into cash within a year or the operating cycle, whichever is longer. parent compan companyK yKs s invest investmen mentt in the subsid subsidiar iaryK yKs s ordina ordinary ry shares and the subsid subsidiar iaryK yKs s D2/ 6a9 Che parent e=uity account balances are eliminated. 6b9 Che investment account represents an interest in the assets assets of the subsidiary. subsidiary. Che statement statement of financ financial ial positi position on of the subsid subsidiar iary y lists lists all its assets assets and liabil liabiliti ities es 6the 6the net assets assets9. 9. Cherefore, there would be a double counting of net assets. imilarly, there would be a double counting in e=uity because all the ordinary shares of the subsidiary are o wned by the shareholders of the parent. Che rema remain iniing exc excess ess of NHP%, HP%,'' ''', ','' ''' ' INHP INHP31 31%, %,'' ''', ','' ''' ' ; 6NHP 6NHP2& 2&', ','' ''', ','' ''' ' Q D21/ Che NHP2',''','''9J should be allocated to goodwill and presented in the consolidated statement of financial position as an intangible assetBGoodwill.


12)% 12)%

SOL3TIONS TO BRIEF E8ERCISES BRIEF E8ERCISE 12;1 an/ a n/ 1

"( "(- 1

&ebt Inv Investme stment nts/ s///// ////// ////// ////// /////// ////// /////// ////// /////// ////// ////// ////// ////// /////// ////// Cas9////////////////////////////////////////////////////////////

?4 4

Cas9/ s9/// ////// ////// ////// ////// //// //// ////// ////// ////// ////// ////// /////// /////// ////// /////// ////// ////// ////// ////// /////// ////// //// // Interest Re Reven"e////////////////////////////////////////

14  

?4

14

BRIEF E8ERCISE 12;2 A"g/ "g/ 1

&e/ &e/ 1

S9are 9are IInv nves estm tme ents/ nts/// //// ////// ////// //////// ////// /////// ////// ////// ////// ////// /////// ////// //// //// //// Cas9////////////////////////////////////////////////////////////

5?4> 4>

Cas9 Cas9// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// // S9are Investments///////////////////////////////////// Gain #n Sa(e #$ S9are Investments//////////

=4 = 4 

5?4>

5?4> =45

BRIEF E8ERCISE 12;5 &e/ &e/ 51

51

S9are 9are Inves nvestm tme ents nts .2? 2?  8 1 4 4 0/// 0///// //// //// //// //// //// // Reven"e $r#m S9are Investments////////////

=>4? 4?

Cas9 Cas9 .2? .2? 8 = =4 4 0 0// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// // S9are Investments/////////////////////////////////////

14 1 4 

=>4?

14

BRIEF E8ERCISE 12;= &e/ 51

3nrea(ie+ L#s L#ssIn#me// e///////////////////////////////// Fair 6a("e A+j"stmentTra+ing .J24 K J?40/ J?40 /////////////////////////////////

54


54

12)& 12)&

BRIEF E8ERCISE 12;? Statement #$ Finania( P#siti#n C"rrent assets S9#rt;term investments4 at $air va("e//////////////////////////////

J?4

In#me Statement Ot9er in#me an+ e%,ense 3nrea(ie+ (#ssin#me/////////////////////////////////////////////////

54

BRIEF E8ERCISE 12; &e/ 51

3nrea(ie+ Gain #r L#ssE"it-////////////////////////// Fair 6a("e A+j"stment N#n;Tra+ing///////////

4 4

BRIEF E8ERCISE 12;> Statement #$ Finania( P#siti#n Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e//////////////////////////////////////////////////////

R4

E"itA"m"(ate+ #t9er #m,re9ensive (#ss//////////////////////////////

R 4

BRIEF E8ERCISE 12;@ Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////////////////////////////////////////// Investment in s9ares #$ 2K? #:ne+ #m,an-4 at e"it-//////////////////////////////////////////////////////////////////////////////// T#ta( investments////////////////////////////////////////////////////////////

J11?4 2>4 J5@?4


12)1'

DBRIEF E8ERCISE 12; E(iminati#ns Pa"(a C#m,an-

I nv es t me nti n S9ann#n Or+inar- S9ares Shar eCapi t al —Or d. Retaine+ Earnings

S9ann#n C#m,an-

&r/

14

Cr/

C#ns#(i+ate+ &ata

14 124 >4

  

124 >4

DBRIEF E8ERCISE 12;1 E(iminati#ns Pa"(a C#m,anInvestment in S9ann#n Or di nar yShar es E%ess #$ C#st Over B##* 6a("e #$ S"bsi+iarS9are Ca,ita(Or+/ Retaine+ Earnings

S9ann#n C#m,an-

&r/

24

Cr/

C#ns#(i+ate+ &ata

24

124 >4

14 124 >4

 14  


12)11

SOL3TIONS FOR &O IT' RE6IE E8ERCISES

&O IT' 12;1 21> .a0 an/ 1

&e/ 51

21@ an/ 1

.b0 &e/ 51

&ebt Investments////////////////////////////////////// Cas9//////////////////////////////////////////////////////

?4

Interest Reeivab(e .?4  @0////////// Interest Reven"e//////////////////////////////////

=4

Cas9/////////////////////////////////////////////////////////// Interest Reeivab(e//////////////////////////////

=4

Cas9/////////////////////////////////////////////////////////// L#ss #n Sa(e #$ &ebt Investments/////////// &ebt Investments .?4  5?0///////////////////////////////

2@4> 145

Interest Reeivab(e//////////////////////////////////// Interest Reven"e .24  @0///////////////////////////////////

14

?4

=4

=4

54


14

12)12

&O IT' 12;2 .10 "ne 1>

Se,t/ 5

.20 an/

1

Ma- 1?

&e/ 51

S9are Investments Q.?4  10  11////////////////////////// Cas9////////////////////////////////////////////////////// Cas9//////////////////////////////////////////////////////////// &ivi+en+ Reven"e//////////////////////////////// S9are Investments Q.14  5  1@///////////////////////// Cas9//////////////////////////////////////////////////////

??4 ??4 14 14

?=4 ?=4

Cas9//////////////////////////////////////////////////////////// S9are Investments///////////////////////////////

=?4

S9are Investments///////////////////////////////////// Reven"e $r#m S9are Investments///////

@14

=?4

@14

&O IT' 12;5 Trading securities: 3nrea(ie+ L#ssIn#me////////////////////////////////////////////////// Fair 6a("e A+j"stmentTra+ing/////////////////////////////////

1545D 1545

D1141  242 Non-trading securities: Fair 6a("e A+j"stmentN#n;Tra+ing//////////////////////////////// 114@?DD 3nrea(ie+ Gain #r L#ssE"it-////////////////////////////////

114@?

DD>4>?  =41


12)13

&O IT' 12;=

1/ 2/ 5/ =/ ?/

Item L#ss #n sa(e #$ investments in s9ares/ 3nrea(ie+ gain #n n#n; tra+ing se"rities/ Fair va("e a+j"stment tra+ing/ Interest earne+ #n investments in b#n+s/ 3nrea(ie+ (#ss #n tra+ing se"rities/

Finania( statement In#me statement Statement #$ $inania( ,#siti#n Statement #$ $inania( ,#siti#n In#me statement In#me statement

Categ#rOt9er in#me an+ e%,ense E"itC"rrent assets Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense


12)14

SOL3TIONS TO E8ERCISES E8ERCISE 12;1 1/

C#m,anies ,"r9ase investments in +ebt #r s9are se"rities bea"se t9e- 9ave e%ess as94 t# generate earnings $r#m investment in#me4 #r $#r strategi reas#ns/

2/

A #r,#rati#n :#"(+ 9ave e%ess as9 t9at it +#es n#t nee+ $#r #,erati#ns +"e t# seas#na( $("t"ati#ns in sa(es an+ as a res"(t #$ e#n#mi -(es/

5/

T9e t-,ia( investment :9en investing as9 $#r s9#rt ,eri#+s #$ time is (#:;ris*4 9ig9 (i"i+it-4 s9#rt;term se"rities s"9 as g#vernment;iss"e+ se"rities/

=/

T9e t-,ia( investments :9en investing as9 t# generate earnings are +ebt se"rities an+ s9are se"rities/

?/

A #m,an- :#"(+ invest in se"rities t9at ,r#vi+e n# "rrent as9 $(#:s $#r s,e"(ative reas#ns/ T9e- are s,e"(ating t9at t9e investment :i(( inrease in va("e/

/

T9e t-,ia( s9are investment :9en investing as9 $#r strategi reas#ns is s9ares #$ #m,anies in a re(ate+ in+"str- #r in an "nre(ate+ in+"strt9at t9e #m,an- :is9es t# enter/

E8ERCISE 12;2 .a0 21> an/ 1

&e/ 51

&ebt Investments////////////////////////////////////// Cas9////////////////////////////////////////////////////

?4

Interest Reeivab(e .?4  @0////////// Interest Reven"e//////////////////////////////////

=4

?4


=4

12)1"

E8ERCISE 12;2 .C#ntin"e+0 21@ an/ 1

1

.b0 &e/ 51

Cas9/////////////////////////////////////////////////////////// Interest Reeivab(e////////////////////////////

=4

Cas9/////////////////////////////////////////////////////////// &ebt Investments .J?4 8 5?0//////////////////////////////// Gain #n Sa(e #$ &ebt Investments .J554? K J540/////////////////////////

554?

Interest Reeivab(e//////////////////////////////////// Interest Reven"e .J24 8 @ 8 120///////////////////////

@

=4

54 54?

@

E8ERCISE 12;5 an"ar- 14 21> &ebt Investments//////////////////////////////////////////////////////////////// Cas9/////////////////////////////////////////////////////////////////////////////

>4

&eember 514 21> Interest Reeivab(e .>4 8 0/////////////////////////////////// Interest Reven"e/////////////////////////////////////////////////////////

45

an"ar- 14 21@ Cas9///////////////////////////////////////////////////////////////////////////////////// Interest Reeivab(e/////////////////////////////////////////////////////

45

an"ar- 14 21@ Cas9///////////////////////////////////////////////////////////////////////////////////// &ebt Investments .=> 8 >40////////////////////////// Gain #n Sa(e #$ &ebt Investments/////////////////////////////

>4

45

45 =45


=4 5

12)1#

E8ERCISE 12;= .a0 Feb/ 1

"(- 1

Se,t/ 1

&e/ 1

S9are Investments//////////////////////////////////// Cas9///////////////////////////////////////////////////

42

Cas9 . 8 J10///////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////



Cas9/////////////////////////////////////////////////////////// S9are Investments .J42 8 50////////////////////////////////// Gain #n Sa(e #$ S9are Investments .J=45 K J5410////////////////////////////

=45

Cas9 .5 8 J10///////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

5

42



541 142

5

.b0 &ivi+en+ reven"e an+ t9e gain #n sa(e #$ s9are investments are re,#rte+ "n+er #t9er in#me an+ e%,ense in t9e in#me statement/

E8ERCISE 12;? an/ 1

"(- 1

&e/ 1

&e/ 51

S9are Investments//////////////////////////////////////////// Cas9///////////////////////////////////////////////////////////

1=241

Cas9 .24? 8 2/@0///////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////////////

>4

Cas9/////////////////////////////////////////////////////////////////// S9are Investments .1=241 8 1?0//////// Gain #n Sa(e #$ S9are Investments/////////

5142

Cas9 .24 8 2/0///////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////////////

?4@

1=241

>4

2@4=2 24>@


?4@

12)1$

E8ERCISE 12; Febr"ar- 1 S9are Investments////////////////////////////////////////////////////////////// Cas9 .? 8 5/@0////////////////////////////////////////////////////

1?4=

Mar9 2 Cas9///////////////////////////////////////////////////////////////////////////////////// L#ss #n Sa(e #$ S9are Investments////////////////////////////////// S9are Investments .1?4= 8 1?0////////////////////

24@? 25

A,ri( 2? Cas9 .= 8 1/0////////////////////////////////////////////////////////////// &ivi+en+ Reven"e///////////////////////////////////////////////////////

=

"ne 1? Cas9///////////////////////////////////////////////////////////////////////////////////// S9are Investments .1?4= 8 2?0//////////////////// Gain #n Sa(e #$ S9are Investments/////////////////////////// "(- 2@ Cas9 .2 8 1/2?0////////////////////////////////////////////////////////////// &ivi+en+ Reven"e///////////////////////////////////////////////////////

1?4=

54@

= >451 41 141? 2? 2?

E8ERCISE 12;> .a0 an/ 1

&e/ 51

51

S9are Investments//////////////////////////////////// Cas9////////////////////////////////////////////////////

1@4

Cas9 .J54 8 2?0//////////////////////////////// S9are Investments/////////////////////////////

4

S9are Investments//////////////////////////////////// Reven"e $r#m S9are Investments .J14 8 2?0//////////////////////////////

=4

1@4

4

.b0 Investment in M#re((i4 an"ar- 1////////////////////////////////////////// Less) &ivi+en+ reeive+////////////////////////////////////////////////////// P("s) S9are #$ re,#rte+ in#me////////////////////////////////////////// Investment in M#re((i4 &eember 51////////////////////////////////////

=4 J1@4 4 =4 J2114


12)1%

E8ERCISE 12;@ 1/

21> Mar/ 1@ "ne 5

&e/ 51

2/

an/

1

"ne 1?

&e/ 51

S9are Investments/////////////////////////////////// Cas9 .24 8 1? 8 150////////////

54

Cas9////////////////////////////////////////////////////////// &ivi+en+ Reven"e .4 8 1?0/////////////////////////////

4

Fair 6a("e A+j"stmentN#n;Tra+ing///// 3nrea(ie+ Gain #r L#ssE"it.=?4 K 540///////////////////

4

S9are Investments/////////////////////////////////// Cas9 .54 8 5 8 0////////////////

@14

Cas9////////////////////////////////////////////////////////// S9are Investments .54 8 50/////////////////////////////

4

S9are Investments/////////////////////////////////// Reven"e $r#m S9are Investments .@4 8 50/////////////////////////////

2=4

54

4

4

@14

4

2=4

E8ERCISE 12; .a0 Sine E+na #:ns m#re t9an ? #$ t9e #r+inar- s9ares #$ &amen Limite+4 E+na is a((e+ t9e ,arent #m,an-/ &amen is t9e s"bsi+iar.a$$i(iate+0 #m,an-/ Bea"se #$ its s9are #:ners9i,4 E+na 9as a #ntr#((ing interest in &amen/ .b0 9en a #m,an- #:ns m#re t9an ? #$ t9e #r+inar- s9ares #$ an#t9er #m,an-4 #ns#(i+ate+ $inania( statements are "s"a((,re,are+/ C#ns#(i+ate+ $inania( statements ,resent t9e t#ta( assets an+ (iabi(ities #ntr#((e+ b- t9e ,arent #m,an-/ T9e- a(s# ,resent t9e t#ta( reven"es an+ e%,enses #$ t9e a$$i(iate+ #m,anies/ .0 C#ns#(i+ate+ $inania( statements are "se$"( bea"se t9e- in+iate t9e magnit"+e an+ s#,e #$ #,erati#ns #$ t9e #m,anies "n+er #mm#n #ntr#(/


12)1&

E8ERCISE 12;1 .a0 &e/ 51

3nrea(ie+ L#ssIn#me////////////////////////////// =4 Fair 6a("e A+j"stmentTra+ing////////////

.b0

=4

Statement #$ Finania( P#siti#n C"rrent assets S9#rt;term investments4 at $air va("e//////////////////////

CHF=4

In#me Statement Ot9er in#me an+ e%,ense 3nrea(ie+ (#ss #n tra+ing se"rities//////////////////////

CHF =4

E8ERCISE 12;11 .a0 &e/ 51

.b0

3nrea(ie+ Gain #r L#ssE"it-///////////////// Fair 6a("e A+j"stmentN#n;Tra+ing / /

=4 =4

Statement #$ Finania( P#siti#n Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////////////////////////////

CHF=4

E"itA"m"(ate+ #t9er #m,re9ensive (#ss////////////////

CHF =4


12)2'

E8ERCISE 12;11 .C#ntin"e+0 .0 &ear Ms/ &ev#ns9ire) Investments :9i9 are (assi$ie+ as tra+ing .9e(+ $#r sa(e in t9e near term0 are re,#rte+ at $air va("e in t9e statement #$ $inania( ,#siti#n4 :it9 "nrea(ie+ gains #r (#sses re,#rte+ in net in#me/ S9are investments :9i9 are (assi$ie+ as n#n;tra+ing .9e(+ (#nger t9an tra+ing0 are a(s# re,#rte+ at $air va("e4 b"t "nrea(ie+ gains #r (#sses are re,#rte+ in t9e e"it- seti#n/ Fair va("e is "se+ as a re,#rting basis bea"se it re,resents t9e as9 rea(iab(e va("e #$ t9e se"rities/ 3nrea(ie+ gains #r (#sses #n tra+ing investments are re,#rte+ in t9e in#me statement bea"se #$ t9e (i*e; (i9##+ t9at t9e se"rities :i(( be s#(+ at $air va("e in t9e near term/ 3nrea(ie+ gains #r (#sses #n n#n;tra+ing se"rities are re,#rte+ in e"it- rat9er t9an in in#me bea"se t9ere is a signi$iant 9ane t9at $"t"re 9anges in $air va("e :i(( reverse "nrea(ie+ gains #r (#sses/ S# as t# n#t +ist#rt in#me :it9 t9ese $("t"ati#ns4 t9e- are re,#rte+ +iret(- in e"it-/ I 9#,e t9at t9e ,ree+ing +is"ssi#n (ears ", an- mis"n+erstan+ings/ P(ease #ntat me i$ -#" 9ave an- "esti#ns/ Sinere(-4 St"+ent


12)21

E8ERCISE 12;12 .a0 Fair 6a("e A+j"stmentTra+ing .12=4 K 1240////////////////////////////////////////////////////// 3nrea(ie+ GainIn#me/////////////////////////////////////////// 3nrea(ie+ Gain #r L#ssE"it-////////////////////////////////////// Fair 6a("e A+j"stmentN#n;Tra+ing//////////////////////// .b0

=4 =4 4 4

Statement #$ Finania( P#siti#n C"rrent assets S9#rt;term investments4 at $air va("e//////////////////////// Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////////////////////////////// E"itA"m"(ate+ #t9er #m,re9ensive (#ss ///////////////// In#me Statement Ot9er in#me an+ e%,ense 3nrea(ie+ gain #n tra+ing se"rities///////////////////////

12=4

=4 

4



=4


12)22

DE8ERCISE 12;15 LENNON ENTERPRISES AN& S3BSI&IAR #r*s9eetC#ns#(i+ate+ Statement #$ Finania( P#siti#n an"ar- 14 21> Assets P(ant an+ e"i,ment .net0 Investment in On# Lt+/ #r+inars9ares C"rrent assets T#ta(s

Lenn#n Enter,rises

On# Lt+/

54

224

224 4 ?@4

E(iminati#ns &r/ Cr/

C#ns#(i+ate+ &ata ?24

224 ?4 2>4

 114 54

E"it- an+ (iabi(ities S9are a,ita( Lenn#n Ent/ S9are a,ita( On# Lt+/ Retaine+ earnings Lenn#n Ent/ Retaine+ earnings On# Lt+/ C"rrent (iabi(ities T#ta(s

254

254 @4

@4



1>4 1@4 ?@4

1>4 1=4 ?4 2>4

1=4 224

224

 254 54


12)23

DE8ERCISE 12;1= LENNON ENTERPRISES AN& S3BSI&IAR #r*s9eetC#ns#(i+ate+ Statement #$ Finania( P#siti#n an"ar- 14 21> Assets P(ant an+ e"i,ment .net0 Investment in On# Lt+/ #r+inar- s9ares Cur r e nta ss et s E%ess #$ #st #ver b##* va("e T#ta(s

Lenn#n Enter,rises

On# Lt+/

54

224

22?4 ??4

E(iminati#ns &r/ Cr/

C#ns#(i+ate+ &ata ?24

22?4 ?4

 1?4

?4 ?@4

?4 54

2>4

E"it- an+ (iabi(ities S9are a,ita( Lenn#n Ent/ S9are a,ita( On# Lt+/ Retaine+ earnings Lenn#n Ent/ Retaine+ earnings On# Lt+/ C"rrent (iabi(ities T#ta(s

254

254 @4

@4



1>4 1@4 ?@4

1>4 1=4 ?4 2>4

1=4 22?4

22?4

 254 54


12)24

SOL3TIONS TO PROBLEMS .

PROBLEM 12;1A

.a0 21> an/ 1

&e/ 51

22 an/ 1

1

&e/ 51

.b0

&ebt Investments/////////////////////////////////// 244 Cas9//////////////////////////////////////////////// 244 Interest Reeivab(e .H<244 8 />0////////////////////////// Interest Reven"e////////////////////////////

Cas9//////////////////////////////////////////////////////// Interest Reeivab(e////////////////////////

1=4 1=4

1=4 1=4

Cas9 .H<144 8 1/?0////////////////// 14?4 &ebt Investments/////////////////////////// 144 Gain #n Sa(e #$ &ebt Investments//////////////////////////////// ?4 Interest Reeivab(e .H<144 8 />0////////////////////////// Interest Reven"e////////////////////////////

>4 >4

Statement #$ Finania( P#siti#n C"rrent assets Interest reeivab(e//////////////////////////////////////////////////////

H< 1=4

Investments &ebt investments4 at $air va("e//////////////////////////////////

H<244


12)2"

PROBLEM 12;2A

.a0 Feb/ 1

Mar/ 1

A,r/ 1

"(- 1

A"g/ 1

Se,t/ 1

Ot/ 1

1


524=


24=

&ebt Investments////////////////////////////////////// Cas9////////////////////////////////////////////////////

?4

Cas9 ./ 8 0/////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

5

Cas9 .?> 8 20//////////////////////////////////////// S9are Investments Q.524= U 0 8 2/////////////////// Gain #n Sa(e #$ S9are Investments////////////////////////////////////

114=

Cas9 .1 8 @0////////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

@

Cas9 .?4 8 > 8 120//////////////////////// Interest Reven"e////////////////////////////////

14>?

Cas9/////////////////////////////////////////////////////////// L#ss #n Sa(e #$ &ebt Investments .?4 K =40//////////////////////////////// &ebt Investments///////////////////////////////

=4

S9are Investments Feb/ 1 524= A"g/ 1 Mar/ 1 24= &e/ 51 Ba(/ =24

14@

A,r/

1

&e/ 51 Ba(/

524=

24=

?4

5

14@ 

@

14>?

14 ?4

&ebt Investments ?4 Ot/ 1

?4




12)2#

PROBLEM 12;2A .C#ntin"e+0 .b0 &e/ 51

3nrea(ie+ L#ssIn#me////////////////////////// Fair 6a("e A+j"stmentTra+ing .=24 K =1420//////////////////////////

Se"ritS",eri#r #r+inar s9ares Pa:(i* #r+inar s9ares

@

C#st

Fair 6a("e

214

224

.= 8 ??0

24= =24

142 =142

.@ 8 2=0

.0 C"rrent assets S9#rt;term investments4 at $air va("e/////////////////////////////// .+0 In#me Statement A#"nt &ivi+en+ Reven"e Gain #n Sa(e #$ S9are Investments Interest Reven"e L#ss #n Sa(e #$ &ebt Investments 3nrea(ie+ L#ssIn#me

@

=142

Categ#rOt9er in#me an+ e%,ense Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense


12)2$

PROBLEM 12;5A

.a0

21> A"g/ 1

Se,t/ 1

Ot/ 1

N#v/ 1

&e/ 1?

51

Cas9 .24 8 J/>0////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

14=

Cas9 .24 8 J@0/////////////////////////////////////// L#ss #n Sa(e #$ S9are Investments .J1@4 K J140//////////////////////////////// S9are Investments .24 8 J0////////

14

Cas9 .@ 8 J550//////////////////////////////////////// S9are Investments .@ 8 J50///////// Gain #n Sa(e #$ S9are Investments .J24= K J2=40/////////////////////////

24=

Cas9 .14? 8 J10/////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

14?

Cas9 .142 8 J/>0////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

@=

Cas9 .54 8 J10/////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

54

21> an/ 1 Ba(ane 21> &e/ 51 Ba(ane

S9are Investments 21> 15?4 Se,t/ 1 Ot/ 1

14=

24 1@4

2=4 24=

14?

@=

54

1@4 2=4

54


12)2%

PROBLEM 12;5A .C#ntin"e+0 .b0 &e/ 51

3nrea(ie+ Gain #r L#ssE"it.J54 K J@4=0///////////////////////////////////// Fair 6a("e A+j"stmentN#n;Tra+ing/// Se"rit-

C#st

Fair 6a("e

Car(ene C#/ #mm#n River+a(e C#/ #mm#n Ra-ns*i C#/ #mm#n

J54 2>4 54 J54

J5@4= 2=4 2>4 J@4=

54 54

.142  520 .54   @0 .14?  1@0

.0 Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////////////////////////////////////////

J

E"itS9are a,ita(#r+inar-//////////////////////// J14?40 Retaine+ earnings////////////////////////////////// 1440 A"m"(ate+ #t9er #m,re9ensive (#ss T#ta( e"it-/////////////////////////////////////

54 J24=4=


@4=

12)2&

PROBLEM 12;=A

.a0 an/

1

Mar/ 1?

"ne 1?

Se,t/ 1?

&e/ 1?

51

.b0 an/

1

Mar/ 1?

"ne 1?

Se,t/ 1?

&e/ 1?

S9are Investments//////////////////////////////// Cas9////////////////////////////////////////////////

@4

Cas9//////////////////////////////////////////////////////// &ivi+en+ Reven"e .=?4 8 J/50//////////////////////////

154?

Cas9//////////////////////////////////////////////////////// &ivi+en+ Reven"e//////////////////////////

154?

Cas9//////////////////////////////////////////////////////// &ivi+en+ Reven"e//////////////////////////

154?

Cas9//////////////////////////////////////////////////////// &ivi+en+ Reven"e//////////////////////////

154?

Fair 6a("e A+j"stmentTra+ing////////// 3nrea(ie+ GainIn#me QJ@4 K .J2= 8 =?40 ////////

2@4

S9are Investments//////////////////////////////// Cas9////////////////////////////////////////////////

@4

Cas9//////////////////////////////////////////////////////// S9are Investments/////////////////////////

154?


154?


154?


154?

@4

154?

154?

154?

154?

2@4

@4

154?

154?

154?


154?

12)3'

PROBLEM 12;=A .C#ntin"e+0 &e/ 51

S9are Investments//////////////////////////////// Reven"e $r#m S9are Investments .J524 8 50////////////////////////

.0

4

C#st Met9#+ S9are Investments 3nrea(ie+ GainIn#me &ivi+en+ Reven"e Reven"e $r#m S9are Investments

J14@4 D 2@4 ?=4 

4 E"itMet9#+ J@=24DD  4

DDJ2= 8 =?4 s9ares DDJ@4  J4 K J?=4


12)31

PROBLEM 12;?A

.a0 an/ 2

2@

5

Feb/ @

1@

"(- 5

Se,t/ 

&e/ 1

.b0

Cas9/////////////////////////////////////////////////////////// S9are Investments///////////////////////////// Gain #n Sa(e #$ S9are Investments////////////////////////////////////

?=4@

S9are Investments//////////////////////////////////// Cas9 .= 8 R>/20////////////////////////

514@

Cas9/////////////////////////////////////////////////////////// &ivi+en+ Reven"e .R1/? 8 14=0//////////////////////////////

14=>

Cas9/////////////////////////////////////////////////////////// &ivi+en+ Reven"e .R/= 8 1420/

=@

Cas9 .R2/5 8 1420///////////////////////////// L#ss #n Sa(e #$ S9are Investments///////// S9are Investments/////////////////////////////

514? 24=

Cas9/////////////////////////////////////////////////////////// &ivi+en+ Reven"e .R1/ 8 14=0/

14=

S9are Investments//////////////////////////////////// Cas9 .R@2 8 0/////////////////////////////

=42

Cas9/////////////////////////////////////////////////////////// &ivi+en+ Reven"e .R1/5? 8 140//////////////////////////////

145?

S9are Investments 11 Ba(/ 14 12 12@ 514@ 21@  =42 1251 Ba(/ 1=4@@

?24 24@

514@

14=>

=@

554

14=

=42

145?

?24 554


12)32

PROBLEM 12;?A .C#ntin"e+0 .0 &e/ 51

3nrea(ie+ Gain #r L#ssE"it-///////////////// Fair 6a("e A+j"stmentN#n;Tra+ing .R1=4@@ K R1140 ///////////////////

542@

A"m"(ate+ Ot9er C#m,re9ensive In#me 3nrea(ie+ Gain #r L#ssE"it-/////////

542@

Se"ritE(+erberr- C#r,#rati#n #r+inarHa9it# C#r,#rati#n #r+inar-

C#st

542@

542@

Fair 6a("e

R @=4

R @4 .14= 8 R=0

@4@@ R1=4@@

>24 .14 8 R>20 R114

.+0 Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////////////////////////////////

R114

E"itT#ta( s9are a,ita( an+ retaine+ earnings/////////////////// A"m"(ate+ #t9er #m,re9ensive (#ss///////////////////// T#ta( e"it-/////////////////////////////////////////////////////////////

%%%%% 542@ R %%%%%


12)33

PROBLEM 12;A

RA&AR IN&3STRIES LT&/ Statement #$ Finania( P#siti#n &eember 514 21> Assets Intangib(e assets G##+:i((///////////////////////////////////////////////////////////

24

Pr#,ert-4 ,(ant4 an+ e"i,ment Lan+//////////////////////////////////////////////////// 54 B"i(+ings///////////////////////////////////////////// ?4 Less) A"m"(ate+ +e,r/ b"i(+ings////////////////////////////////////////// 1@4 >>4 E"i,ment////////////////////////////////////////// 2>?4 Less) A"m"(ate+ +e,r/ E"i,ment/////////////////////////////////////// ?24 2254

145@54

Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////// Investment in s9ares #$ 2K? #:ne+ #m,an-4 at e"it-////////////////////////// C"rrent assets Pre,ai+ Ins"rane////////////////////////////// Invent#r-///////////////////////////////////////////// A#"nts reeivab(e////////////////////////// Less) A((#:ane $#r +#"bt$"( a#"nts//////////////////////////////////// S9#rt;term investments4 at $air va("e //////////////////////////////// Cas9//////////////////////////////////////////////////// T#ta( assets////////////////////////////////////////////////

2@4 5@4

4

14 1>4 1=4 4

15=4 1@4 =24

?=24 24>14


12)34

PROBLEM 12;A .C#ntin"e+0 RA&AR IN&3STRIES LT&/ Statement #$ Finania( P#siti#n .C#ntin"e+0 &eember 514 21> E"it- an+ Liabi(ities E"itS9are a,ita(#r+inar-4 1 ,ar va("e4 ?4 s9ares a"t9#rie+ 1?4 s9ares iss"e+ an+ #"tstan+ing/////////////////////////////////14?4 S9are ,remi"m#r+inar-///////////////// 154 1454 Retaine+ earningsVVVVVVVV/ 154 A"m"(ate+ #t9er #m,re9ensive in#me///////////////////////////////////////// @4 14>=14 N#n;"rrent (iabi(ities B#n+s ,a-ab(e4 14 +"e 225 C"rrent (iabi(ities N#tes ,a-ab(e///////////////////////////////////// A#"nts ,a-ab(e////////////////////////////// In#me ta%es ,a-ab(e//////////////////////// &ivi+en+s ,a-ab(e////////////////////////////// T#ta( e"it- an+ (iabi(ities/////////////////////////

?=4

>4 2=4 124 @4

?14 24>14


12)3"

DPROBLEM 12;>A

.a0

21> &e/ 51 S9are Investments C"rrent Assets

.b0

1421@4 1421@4

LI3 LIMITE& AN& S3BSI&IAR #r*s9eetC#ns#(i+ate+ Statement #$ Finania( P#siti#n &eember 514 21> Assets P(ant an+ e"i,ment .net0 Investment in ang P(astis #r+inar- s9ares C"rrent assets E%ess #$ #st #ver b##* va("e #$ s"bsi+iarT#ta(s

Li" Limite+ 2414

1421@4 224

ang P(astis >4

E(iminati#ns &r/ Cr/ @=4

24@4 1421@4 

=5?4?

11?4 54?@4

C#ns#(i+ate+ &ata

 >4?

11?4 54>24?

141114?

E"it- an+ (iabi(ities S9are a,ita(Li" Limite+ S9are a,ita(ang P(astis Retaine+ earnings Li" Limite+ Retaine+ earnings ang P(astis C"rrent (iabi(ities

Tot al s

14?4

14?4 ?2?4

?2?4



14?24

14?24 ==4

?>@4 54?@4

==4



24? 141114?

>4? 1421@4

1421@4 

54>24?


12)3#

DPROBLEM 12;>A .C#ntin"e+0 .0

LI3 LIMITE& AN& S3BSI&IAR C#ns#(i+ate+ Statement #$ Finania( P#siti#n &eember 514 21> Assets G##+:i(( .14 @=40////////////////////////// P(ant an+ e"i,ment4 net .24>>4  @=40 C"rrent assets/////////////////////////////////////////////////// T#ta( assets////////////////////////////////////////////////

24@4 >4? 54>24?

E"it- an+ Liabi(ities E"it-///////////////////////////////////////////////////////////////// S9are a,ita(#r+inar-//////////////////////////// 14?4 Retaine+ earnings///////////////////////////////////// 14?24 C"rrent (iabi(ities/////////////////////////////////////////////// T#ta( e"it- an+ (iabi(ities////////////////////

5424 >4? 54>24?

−

 11?4


12)3$

PROBLEM 12;1B

.a0 21> an/ 1

&e/ 51

22 an/ 1

1

&e/ 51

.b0

&ebt Investments////////////////////////////////// Cas9///////////////////////////////////////////////

=4

Interest Reeivab(e .J=4 8 /0// / Interest Reven"e///////////////////////////

2=4

Cas9/////////////////////////////////////////////////////// Interest Reeivab(e////////////////////////

2=4

Cas9 .J2=4 8 1/120///////////////////////// &ebt Investments////////////////////////// Gain #n Sa(e #$ &ebt Investments////////////////////////////////

2@4@

Interest Reeivab(e .J14 8 /0/ // Interest Reven"e///////////////////////////

4

=4

2=4

2=4

2=4 2@4@

4

Statement #$ Finania( P#siti#n C"rrent assets Interest reeivab(e///////////////////////////////////////////////////////

J 2=4

Investments &ebt investments4 at $air va("e///////////////////////////////////

J=4


12)3%

PROBLEM 12;2B

.a0 Feb/ 1

Mar/ 1

A,r/ 1

"(- 1

A"g/ 1

Se,t/ 1

Ot/ 1

1

S9are Investments////////////////////////////////////// Cas9/////////////////////////////////////////////////////

54@

S9are Investments////////////////////////////////////// Cas9/////////////////////////////////////////////////////

245

&ebt Investments//////////////////////////////////////// Cas9/////////////////////////////////////////////////////

=4

Cas9 . / 8 ?0////////////////////////////////////// &ivi+en+ Reven"e///////////////////////////////

5

Cas9///////////////////////////////////////////////////////////// Gain #n Sa(e #$ S9are Investments// / S9are Investments Q. 54@ U ?0 8 5////////////////////

24>

Cas9 . 1 8 0/////////////////////////////////////////// &ivi+en+ Reven"e///////////////////////////////



Cas9 . =4 8  8 120///////////////////////// Interest Reven"e/////////////////////////////////

14@

Cas9///////////////////////////////////////////////////////////// &ebt Investments//////////////////////////////// Gain #n Sa(e #$ &ebt Investments . ==4 K =40/////////////////////////

==4

S9are Investments Feb/ 1 54@ A"g/ 1 Mar/ 1 245 &e/ 51 Ba(/ 5242

1@4=@

A,r/

1

&e/ 51 Ba(/

54@

245

=4

5

2422 1@4=@



14@

=4 =4

&ebt Investments =4 Ot/ 1

=4




12)3&

PROBLEM 12;2B .C#ntin"e+0 .b0 &e/ 51

3nrea(ie+ L#ssIn#me///////////////////////// Fair 6a("e A+j"stmentTra+ing//////

Se"rit-

C#st

Fair 6a("e

#- #r+inarA"re(i"s #r+inar-

12452 245 5242

1542 1>4= 54

242

.2 8 . 8

242

0 20

.0 C"rrent assets S9#rt;term investments4 at $air va("e///////////////////////////////

.+0 In#me Statement A#"nt &ivi+en+ Reven"e Gain #n Sa(e #$ S9are Investments Interest Reven"e Gain #n Sa(e #$ &ebt Investments 3nrea(ie+ L#ssIn#me

54

Categ#rOt9er in#me an+ e%,ense Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense Ot9er in#me an+ e%,ense


12)4'

PROBLEM 12;5B

.a0 A"g/ 1

Se,t/ 1

Ot/ 1

N#v/ 1

&e/ 1?

51

21> Cas9 .=4 8 /?0////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

24 24

Cas9 .14? 8 @/?0////////////////////////////////// S9are Investments .14? 8 0//////// Gain #n Sa(e #$ S9are Investments////////////////////////////////////

124>?

Cas9 . 8 50//////////////////////////////////////// S9are Investments . 8 2=0///////// Gain #n Sa(e #$ S9are Investments .1@4 K 1=4=0/////////////////////////

1@4

Cas9 .54 8 10/////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

54

Cas9 .54= 8 /0////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

24=

Cas9 .54? 8 10/////////////////////////////////////// &ivi+en+ Reven"e/////////////////////////////

54?

21> an/ 1 Ba(ane 21> &e/ 51 Ba(ane

S9are Investments 21> 1@4 Se,t/ 1 Ot/ 1

4 54>?

1=4=

54

54

24=

54?

4 1=4=

124


12)41

PROBLEM 12;5B .C#ntin"e+0 .b0 &e/ 51

3nrea(ie+ Gain #r L#ssE"it.124 K 1?4>0///////////////////////////////// Fair 6a("e A+j"stment N#n;Tra+ing ////////////////////////////////////////

24 24

Se"rit-

C#st

Fair 6a("e

Tr#:bri+ge C#/ #r+inarH#((- C#/ #r+inarOrienta( M#t#rs C#/ #r+inar-

 @14 214

 >@42 2=4?

.54= 8 250 .54? 8 >0

4 124

?>4 1?4>

.54 8 10

.0 Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e////////////////////////////////////////////////// E"itS9are a,ita(#r+inar-/////////////////////// Retaine+ earnings//////////////////////////////// A"m"(ate+ #t9er #m,re9ensive (#ss//////////////////////////////////////////// T#ta( e"it-///////////////////////////////////

 1?4>

244 1424 24 541>41


12)42

PROBLEM 12;=B

.a0 21> an/

1

"ne 5

&e/ 51

51

.b0 21> an/

1

"ne 5

&e/ 51

51

S9are Investments////////////////////////////// 1414 Cas9///////////////////////////////////////////// Cas9///////////////////////////////////////////////////// &ivi+en+ Reven"e .=4 8 J/?0////////////////////////

24

Cas9///////////////////////////////////////////////////// &ivi+en+ Reven"e .=4 8 J/?0////////////////////////

24

Fair 6a("e A+j"stment N#n;Tra+ing///////////////////////////////////// 3nrea(ie+ Gain #r L#ss E"itQJ1414 K .J5 8 =40//////

1414

24

24

14 14

S9are Investments////////////////////////////// 1414 Cas9///////////////////////////////////////////// Cas9///////////////////////////////////////////////////// S9are Investments//////////////////////

24

Cas9///////////////////////////////////////////////////// S9are Investments//////////////////////

24

S9are Investments////////////////////////////// Reven"e $r#m S9are Investments .J4 8 20/ / /

124

1414

24

24

124


12)43

PROBLEM 12;=B .C#ntin"e+0 .0

C#st Met9#+ S9are Investments 3nrea(ie+ GainE"it&ivi+en+ Reven"e Reven"e $r#m S9are Investments

E"itMet9#+

J1424 D J141@4 DD 14 =4   124

DDJ5 8 =4 s9ares DDJ1414  J124 K J=4


12)44

PROBLEM 12;?B

.a0 an/ >

1

2

Feb/ 2

1

"(- 1

Se,t/ 1

&e/ 1? .b0

Cas9 .> 8 ?0////////////////////////////////////////// S9are Investments/////////////////////////////// Gain #n Sa(e #$ S9are Investments///////////////////////////////////////

542

S9are Investments/////////////////////////////////////// Cas9 .5 8 >@/?0//////////////////////////////

254??

Cas9////////////////////////////////////////////////////////////// &ivi+en+ Reven"e .1/1? 8 0/////////

145?

Cas9////////////////////////////////////////////////////////////// &ivi+en+ Reven"e ./= 8 @0/////////

52

Cas9 .2 8 @0////////////////////////////////////////// L#ss #n Sa(e #$ S9are Investments/////////// S9are Investments///////////////////////////////

24@ 14

Cas9////////////////////////////////////////////////////////////// &ivi+en+ Reven"e .1/? 8 0//////////////////////////////////////

=?

S9are Investments/////////////////////////////////////// Cas9 .>? 8 @0///////////////////////////////////

4

Cas9////////////////////////////////////////////////////////////// &ivi+en+ Reven"e .1/? 8 1410//////

14?

S9are Investments 11 Ba(/ 4= 1> 11 254?? 21 1 4 1251 Ba(/ 12?4??

5?4 =42

254??

145?

52

224=

=?

4

14?

5?4 224=


12)4"

PROBLEM 12;?B .C#ntin"e+0 .0 &e/ 51

3nrea(ie+ Gain #r L#ssE"it-//////////////////// Fair 6a("e A+j"stmentN#n;Tra+ing .12?4?? K 1224=0 /////////////////////////// A"m"(ate+ Ot9er C#m,re9ensive In#me/////////////////////////////////////////////////////////// 3nrea(ie+ Gain #r L#ssE"it-//////////// Se"rit-

3*raine OAO Or+inar- S9ares 6an"i S,A Or+inar- S9ares

C#st

Fair 6a("e

 =24 @54?? 12?4??

 =542 >42 1224=

541? 541?

541? 541?

. 8 =@0 .141 8 >20

.+0 Investments Investments in s9ares #$ (ess t9an 2 #:ne+ #m,anies4 at $air va("e///////////////////////////////////////////////

1224=

E"itT#ta( s9are a,ita( an+ retaine+ earnings////////////////////// A"m"(ate+ #t9er #m,re9ensive (#ss/////////////////////// T#ta( e"it-///////////////////////////////////////////////////////////////

%%%%% 541?  %%%%%


12)4#

PROBLEM 12;B

RE&LAN&S ENTERPRISES AG Statement #$ Finania( P#siti#n &eember 514 21> Assets Intangib(es G##+:i((/////////////////////////////////////////////

CHF54

Pr#,ert-4 ,(ant4 an+ e"i,ment Lan+//////////////////////////////////////////////////// CHF>@4 B"i(+ings//////////////////////////////////////////// CHF145?4 Less) A"m"(ate+ &e,reiati#nWb"i(+ings//////// 2>4 14@4 E"i,ment////////////////////////////////////////// =1?4 Less) A"m"(ate+ +e,reiati#nWe"i,ment////// @4 55?4

241?4

Investments Investment in s9ares #$ 2K? #:ne+ #m,an-4 at e"it-///////////// C"rrent assets Pre,ai+ ins"rane///////////////////////////// Invent#r-//////////////////////////////////////////// A#"nts reeivab(e///////////////////////// Less) A((#:ane $#r +#"bt$"( a#"nts//////////////////////////////// S9#rt;term investments4 at $air va("e////////////////////////////////// Cas9//////////////////////////////////////////////////// T#ta( assets//////////////////////////////////////////////

4

2?4 2??4 15?4 14

12?4 2@4 214

@?4 CHF=424


12)4$

PROBLEM 12;B .C#ntin"e+0 RE&LAN&S ENTERPRISES AG Statement #$ Finania( P#siti#n .C#ntin"e+0 &eember 514 21> E"it- an+ Liabi(ities E"itS9are a,ita(#r+inar-4 CHF? ,ar va("e4 ?4 s9ares a"t9#rie+4 ==4 s9ares iss"e+ an+ #"tstan+ing//////////////////////////////////////////CHF2424 S9are ,remi"m#r+inar-//////////////////////////////// 54 Retaine+ earnings/////////////////////////////////////// =@4 CHF24@4 N#n;"rrent (iabi(ities B#n+s ,a-ab(e4 14 +"e 22>///////////////////////////////////////// C"rrent (iabi(ities N#tes ,a-ab(e//////////////////////////////////////////// A#"nts ,a-ab(e////////////////////////////////////// In#me ta%es ,a-ab(e//////////////////////////////// &ivi+en+s ,a-ab(e///////////////////////////////////// /// T#ta( e"it- an+ (iabi(ities////////////////////////////////

///114 ///5>?4 // 1@4 >?4

?>4

>=4 CHF=424


12)4%

DPROBLEM 12;>B

c.31 S9are Investments .a0 De C"rrent Assets .b0

>4 >4

PATEL COMPAN LT&/ AN& S3BSI&IAR #r*s9eetC#ns#(i+ate+ Statement #$ Finania( P#siti#n &eember 514 21> Assets P(ant an+ e"i,ment .net0 Investment in Sing9 C#m,an#r+inar- s9ares C"rrent assets E%ess #$ #st #ver b##* va("e #$ s"bsi+iarT#ta(s E"it- an+ Liabi(ities S9are a,ita( Pate( C#m,anS9are a,ita( Sing9 C#m,anRetaine+ earnings Pate( C#m,anRetaine+ earnings Sing9 C#m,anC"rrent (iabi(ities Tot al s

Pate( C#m,an14@@24

>4 >>@4

Sing9 C#m,an5?14

E(iminati#ns &r/ Cr/ 2?4

242?@4

>4 5>4

5?4 5454

C#ns#(i+ate+ &ata

 141?>4

5?4 54=?4

>54

14=>4

14=>4 54

54



?=54

?=54

2@4

@>4

2@4 4

5454

>54

>4

 4 >4

54=?4


12)4&

DPROBLEM 12;>B .C#ntin"e+0 .0

PATEL COMPAN LT&/ AN& S3BSI&IAR C#ns#(i+ate+ Statement #$ Finania( P#siti#n &eember 514 21> Assets G##+:i(( .4 2?40//////////////////////////// P(ant an+ e"i,ment4 net .242554  2?40////////////////////////////////// C"rrent assets/////////////////////////////////////////////////// T#ta( assets//////////////////////////////////////////// −



5?4

242?@4 141?>4 54=?4

E"it- an+ Liabi(ities E"itS9are a,ita(#r+inar-//////////////////////////// 14=>4 Retaine+ earnings///////////////////////////////////// ?=54 C"rrent (iabi(ities/////////////////////////////////////////////// T#ta( e"it- an+ (iabi(ities////////////////////

24=4 4 54=?4


12)"'

COMPREHENSI6E PROBLEM) CHAPTERS 11 TO 12

Part I .a0 T#)

Min+- Fe(+*am,4 Osar L#,e4 an+ L#ri Me(t#n

Fr#m)

#e St"+ent

&ate)

?221

Re)

Ana(-sis #$ Partners9i, vs/ C#r,#rate F#rm #$ B"siness Organiati#n

I 9ave e%amine+ -#"r sit"ati#n regar+ing t9e estab(is9ment #$ -#"r b"siness/ Be$#re +is"ssing m- re#mmen+ati#ns4 I :#"(+ (i*e t# brie$(- revie: t9e a+vantages an+ +isa+vantages #$ ,artners9i,s an+ #r,#rati#ns/ T9e ,rimar- a+vantages #$ a ,artners9i, #ver a #r,#rati#n are) 1/

Partners9i,s are m#re easi(- $#rme+ t9an #r,#rati#ns/ Partners9i,s an be $#rme+ sim,(- b- t9e v#("ntar- agreement #$ t:# #r m#re in+ivi+"a(s/ F#rming a #r,#rati#n re"ires ,re,aring an+ $i(ing +#"; ments :it9 g#vernmenta( agenies4 ,a-ing in#r,#rati#n $ees4 et/

2/

In#me $r#m a ,artners9i, is s"bjet t# (ess ta% t9an in#me $r#m a #r,#rati#n/ Even t9#"g9 ,artners9i,s are re"ire+ t# $i(e in$#rmati#n ta% ret"rns .ret"rns t9at s9#: $inania( in$#rmati#n4 b"t +# n#t re"ire an- ,a-ment #$ ta%es04 t9e- are n#t #nsi+ere+ ta%ab(e entities/ A ,artner7s s9are #$ ,artners9i, in#me is ta%e+ #n(- #n t9e ,artner7s ,ers#na( in#me ta% ret"rn/ C#r,#rati#ns are ta%ab(e entities an+ ,a- ta%es #n #r,#rate in#me/ In a++iti#n4 an- +ivi+en+s +istrib"te+ b- #r,#rati#ns t# in+ivi+"a(s are s"bjet t# ,ers#na( in#me ta% #n t9e ,ers#na( in#me ta% ret"rn/ T9is is *n#:n as +#"b(e ta%ati#n/

5/

Partners9i,s 9ave m#re $(e%ibi(it- in +eisi#n ma*ing/ T9e +eisi#n; ma*ing ,r#ess "se+ in a ,artners9i, is +etermine+ b- t9e ,artners4 :9ereas s#me +eisi#ns re"ire+ in #r,#rati#ns m"st $#((#: $#rma( ,r#e+"res +esribe+ in t9e b-(a:s #$ t9e #r,#rati#n/


12)"1

COMPREHENSI6E PROBLEM .C#ntin"e+0 T9e ,rimar- a+vantages #$ a #r,#rati#n #ver a ,artners9i, are) 1/

M"t"a( agen- +#es n#t e%ist in a #r,#rati#n/ T9is means t9at t9e #:ners #$ a #r,#rati#n .s9are9#(+ers0 +# n#t 9ave t9e ,#:er t# bin+ t9e #r,#rati#n be-#n+ t9eir a"t9#rit-/ F#r e%am,(e4 a s9are9#(+er :9# is n#t em,(#-e+ b- t9e $irm ann#t enter int# #ntrats #r #t9er agreements #n be9a($ #$ t9e #r,#rati#n/ O:ners #$ a ,artners9i, .,artners0 are b#"n+ b- t9e ati#ns #$ t9eir ,artners4 even :9en ,artners at be-#n+ t9e s#,e #$ t9eir a"t9#rit-/ T9is is tr"e as (#ng as t9e ati#ns seem a,,r#,riate $#r t9e b"siness/

2/

T9e #:ners #$ a #r,#rati#n 9ave (imite+ (iabi(it-/ 9en t9e #r,#rati#n7s assets are n#t s"$$iient t# ,a- re+it#rs7 (aims4 t9e ,ers#na( assets #$ t9e s9are9#(+ers are ,r#tete+ $r#m t9e #r,#rati#n7s re+it#rs/ In a ,artners9i,4 #ne t9e assets #$ t9e ,artners9i, 9ave been "se+ t# ,a- re+it#rs7 (aims4 t9e ,ers#na( assets #$ t9e ,artners an be ta*en t# satis$- t9e re+it#rs7 +eman+s/ A s,eia( t-,e #$ ,artners9i,4 a (imite+ ,artners9i,4 ,r#tets t9e ,ers#na( assets #$ (imite+ ,artners4 b"t at (east #ne ,artner7s assets are sti(( at ris*/ T9is ,artner is a((e+ a genera( ,artner/

5/

T9e (i$e #$ a #r,#rati#n is "n(imite+/ 9en #:ners9i, 9anges #"r .e/g/4 s9are9#(+ers b"- #r se(( s9ares04 t9e #r,#rati#n #ntin"es t# e%ist as a (ega( entit-/ 9en #:ners9i, 9anges #"r in a ,artners9i, .e/g/4 e%isting ,artner (eaves4 ne: ,artner is a++e+04 t9e #(+ ,artners9i, n# (#nger e%ists as a (ega( entit-/ A ne: ,artners9i, an be $#rme+ an+ t9e b"siness an #ntin"e4 b"t t9e #rigina( ,artners9i, m"st be +iss#(ve+/

A$ter e%amining -#"r sit"ati#n4 I be(ieve t9at -#" :#"(+ be :ise t# 9##se t9e #r,#rate $#rm #$ b"siness #rganiati#n/ T9ere are t:# reas#ns $#r t9is re#mmen+ati#n/ T9e $irst reas#n is t9at t9e vent"re -#" are ab#"t t# "n+erta*e :i(( re"ire signi$iant a,ita( an+4 genera((-4 a,ita( is m#re easi(raise+ via a #r,#rati#n t9an a ,artners9i,/ T9e #t9er reas#n is t9at -#" :i(( be ,r#tete+ $r#m "n(imite+ (iabi(it- i$ -#" in#r,#rate as #,,#se+ t# $#rming a ,artners9i,/ Given t9e ,#tentia( ris* #$ starting a vent"re #$ t9is *in+4 I be(ieve it is in -#"r best interest t# ,r#tet -#"r ,ers#na( assets b- "sing t9e #r,#rate $#rm #$ #rganiati#n/ I :is9 -#" t9e best in -#"r ne: en+eav#r an+ ,(ease a(( ",#n me :9en -#" are in nee+ #$ $"rt9er assistane/


12)"2

COMPREHENSI6E PROBLEM .C#ntin"e+0 Part II .b0 E"it- $inaning #,ti#n) P#sitives N# $i%e+ interest ,a-ments re"ire+

Negatives C#ntr#( #$ t9e #r,#rati#n is (#st &i$$i"(t- #$ $in+ing an intereste+ invest#r Earnings ,er s9are are (#:er

&ebt $inaning #,ti#n) P#sitives C#ntr#( sta-s :it9 t9ree in#r,#rat#rs N# nee+ $#r a++iti#na( invest#r Earnings ,er s9are are 9ig9er

Negatives Interest ,a-ments "i*(- +rain as9

S9ares #"tstan+ing be$#re $inaning

4 s9ares

E"it- Finaning In#me be$#re interest an+ ta%es Interest e%,ense In#me be$#re ta%es Ta% e%,ense Net in#me S9ares #"tstan+ing a$ter $inaning Earnings ,er s9are

54  54 4 2=4 24  1/2

&ebt Finaning 54 124 1>=4 ??4@ 11@452 4  1/>

Part III .0 1/

121

Cas9////////////////////////////////////////////// B"i(+ings/////////////////////////////////////// S9are Ca,ita(Or+inar-////// S9are Premi"mOr+inar-/ /

14 24 124 1@4


12)"3

COMPREHENSI6E PROBLEM .C#ntin"e+0 >211

>2>1>

Cas9/////////////////////////////////////////////// S9are Ca,ita(Or+inar-/////// S9are Premi"mOr+inar-/ / / S9are &ivi+en+s .1?4 8 /1 8 50/////////////////// Or+inar- S9are &ivi+en+s &istrib"tab(e/////////////////////// S9are Premi"mOr+inar-/ / /

4 1@4 >24

=?4 54 1?4

>511>

N# entr-

@1?1>

Or+inar- S9are &ivi+en+s &istrib"tab(e/////////////////////////////// S9are Ca,ita(Or+inar-///////

54

Cas9 &ivi+en+s .1?4 8 /?0//////////////////////// &ivi+en+s Pa-ab(e/////////////////

@42?

12=1>

54

@42?

121=1> N# entr122=1> &ivi+en+s Pa-ab(e///////////////////////// Cas9//////////////////////////////////////// 2/

@42? @42?

S9ares Iss"e+ an+ O"tstan+ing

&ate

Event

121 >211 @1?1>

Iss"ane t# In#r,#rat#rs Iss"ane t# Marin# S9are +ivi+en+ iss"ane

T#ta( S9ares N"mber #$ Iss"e+ an+ S9ares Iss"e+ O"tstan+ing 4 4 1?4

4 1?4 1?4

Part I6 .+0 1/

111@

Cas9////////////////////////////////////////////// B#n+s Pa-ab(e/////////////////////

?=@4 ?=@4


12)"4

COMPREHENSI6E PROBLEM .C#ntin"e+0 2/

5/

=/

12511@ Interest E%,ense///////////////////////////////////// =142 B#n+s Pa-ab(e .?24 U 10///////// Interest Pa-ab(e .4 8 /0//////////////////////////// 111

?42 54

Interest Pa-ab(e////////////////////////////////////// 54 Cas9//////////////////////////////////////////////////

54

12511 Interest E%,ense///////////////////////////////////// =142 B#n+s Pa-ab(e .?24 U 10//////////////////////////////// Interest Pa-ab(e .4 8 /0////////////////////////////

?42 54

Part 6 .e0 .10 21

21>

S9are Investments /////////////////////////// Cas9///////////////////////////////////////////

4

S9are Investments /////////////////////////// Reven"e $r#m S9are Investments ./D 8 540/ / D4 U 1?4

1@4

Cas9/////////////////////////////////////////////////// S9are Investments ./ 8 2410///////////////////////////

142

S9are Investments//////////////////////////// Reven"e $r#m S9are Investments ./ 8 >40/ / /

=24

Cas9/////////////////////////////////////////////////// S9are Investments ./ 8 240//////////////////////////

124

4

1@4

142

=24


124

12)""

COMPREHENSI6E PROBLEM .C#ntin"e+0 21@

.20

S9are Investments///////////////////////// Reven"e $r#m S9are Investments ./ 8 1?40/////////////////////

54

Cas9///////////////////////////////////////////////// S9are Investments ./ 8 ?40///////////////////////

54

54

54

S9are Investments 4 1@4 142 =24 124 54 54 >4>=


12)"#

MC12

.a0

MATCHA CREATIONS

1/ T9e am#"nt #$ in$("ene -#" :#"(+ 9ave in T9e Beaner- :#"(+ +etermine 9#: -#" :#"(+ a#"nt $#r t9e investment/ Given t9at -#" :#"(+ #:n 5 #$ t9e #r+inar- s9ares #$ T9e Beaner-4 it :#"(+ be ass"me+ ."n(ess t9ere :as evi+ene t# t9e #ntrar-0 t9at -#" #"(+ e%ert signi$iant in$("ene #ver t9e +a-;t#;+a- #,erati#ns #$ t9e b"siness/ T9is is es,eia((- s# given t9e sma(( n"mber #$ s9are9#(+ers/ Signi$iant in$("ene #ver an ass#iate ma- a(s# res"(t $r#m re,resentati#n #n t9e b#ar+ #$ +iret#rs4 ,artii,ati#n in ,#(i-;ma*ing ,r#esses4 materia( inter#m,an- transati#ns4 inter9ange #$ manageria( ,ers#nne(4 #r te9n#(#gia( +e,en+en-/ Ass"ming signi$iant in$("ene e%iste+4 t9e investment :#"(+ be a#"nte+ $#r "sing t9e e"it- met9#+ #$ a#"nting/ H#:ever4 in t9is ase4 t9e T9#rnt#n sisters :i(( sti(( e%erise maj#rit- #ntr#( an+ ma- n#t be :i((ing t# (et an invest#r ,artii,ate in t9e +eisi#n; ma*ing ,r#ess/ I$ t9is +i+ #"r4 signi$iant in$("ene ma- n#t e%ist an+ t9e investment :#"(+ be a#"nte+ $#r "sing t9e #st met9#+/ 2/ One #$ t9e maj#r a+vantages #$ g#ing a9ea+ :it9 t9is investment :#"(+ be t9e strategi a+vantage #$ t9e 9#ri#nta( an+ vertia( integrati#n t9at :#"(+ #"r/ N#t #n(- :#"(+ -#" e(iminate a #m,etit#r b"t -#" b#t9 #"(+ (earn t9e b"siness #$ r#asting beans :9i(e ta*ing a+vantage #$ t9e e%,ertise t9e T9#rnt#n sisters 9ave +eve(#,e+ :it9 res,et t# t9e #,erati#n #$ t9eir #$$ee s9#,/


12)"$

MC12 .C#ntin"e+0 .a0 .C#ntin"e+0 5/ T9ere :#"(+ be +isa+vantages ass#iate+ :it9 t9is investment as :e((/ F#r e%am,(e4 t9ere ma- be a signi$iant time investment re"ire+ b- b#t9 #$ -#" es,eia((- sine b#t9 #$ t9e T9#rnt#n sisters are ver- b"s- an+ :#"(+ (i*e t9e invest#r t# ta*e #ver s#me #$ t9e res,#nsibi(ities #$ r"nning t9e b"siness/ A(s#4 t9e T9#rnt#n sisters :i(( sti(( e%erise maj#rit- #ntr#( an+ ma- n#t be :i((ing t# (et an invest#r ,artii,ate in t9e +eisi#n;ma*ing ,r#ess/ Fina((-4 i$ t9e investment +i+ n#t :#r* #"t4 it ma- be +i$$i"(t t# $in+ an#t9er invest#r t# ,"r9ase t9e s9ares 9e(+ b- Mat9a X C#$$ee Creati#ns/ .b0 S9are Investments/////////////////////////////////////////////////

1?4

Cas9 ///////////////////////////////////////////////////////////////

1?4

.0

CostMet hod Cas9/////////////////////////////////////////////////////////////////////////

>4?

&ivi+en+ Reven"e .2?4 8 50//////////////

>4?

E"it- Met9#+ S9are Investments/////////////////////////////////////////////////

1?4

Reven"e $r#m S9are Investments .?4 8 50 ///////////////////////////////////////// Cas9 .2?4 8 50/////////////////////////////////////////////

1?4 >4?

S9are Investments/////////////////////////////////////////


>4?

12)"%

MC12 .C#ntin"e+0 .+0

Bea"se t9e investment in T9e Beaner- is a strategi investment4 it :#"(+ be (assi$ie+ as a (#ng;term investment in t9e n#n;"rrent assets seti#n #$ Mat9a X C#$$ee Creati#ns7 statement #$ $inania( ,#siti#n/ I$ t9e investment :ere a#"nte+ $#r "sing t9e #st met9#+4 it :#"(+ be re#r+e+ at its #rigina( #st #$ 1?4/ I$ t9e investment :ere a#"nte+ $#r "sing t9e e"it- met9#+4 it :#"(+ be a#"nte+ $#r at its #rigina( #st ,("s a ,r#,#rti#nate s9are #$ T9e Beaner-7s in#me4 (ess a ,r#,#rti#nate s9are #$ an- +ivi+en+s ,ai+ b- T9e Beaner-/ F#r t9e "rrent -ear t9e investment :#"(+ be at 224? .1?4  1?4 K >4?0/


12)"&

BP 12;1

FINANCIAL REPORTING PROBLEM

.a0 TSMC ma+e t9e $#((#:ing statement ab#"t :9at :as in("+e+ #n its #ns#(i+ate+ $inania( statement)

Basis #$ C#ns#(i+ati#n T9e #ns#(i+ate+ $inania( statements in#r,#rate t9e $inania( statements #$ TSMC an+ entities #ntr#((e+ b- TSMC .its s"bsi+iaries0/ C#ntr#( is a9ieve+ :9en t9e C#m,an-) • •

•

9as ,#:er #ver t9e investeeY is e%,#se+4 #r 9as rig9ts/ t# variab(e ret"rns $r#m its inv#(vement :it9 t9e investeeY an+ 9as t9e abi(it- t# "se its ,#:er t# a$$et its ret"rns/

T9e C#m,an- reassesses :9et9er #r n#t it #ntr#(s an investee i$ $ats an+ ir"mstanes in+iate t9at t9ere are 9anges t# #ne #r m#re #$ t9e t9ree e(ements #$ #ntr#( (iste+ ab#ve/ 9en t9e C#m,an- 9as (ess t9an a maj#rit- #$ t9e v#ting rig9ts #$ an investee4 it 9as ,#:er #ver t9e investee :9en t9e v#ting rig9ts are s"$$iient t# give it t9e ,ratia( abi(it- t# +iret t9e re(evant ativities #$ t9e investee "ni(atera((-/ C#ns#(i+ati#n #$ a s"bsi+iar- begins :9en t9e C#m,an- #btains #ntr#( #ver t9e s"bsi+iar- an+ eases :9en t9e C#m,an- (#ses #ntr#( #$ t9e s"bsi+iar-/ S,ei$ia((-4 in#me an+ e%,enses #$ a s"bsi+iar- a"ire+ #r +is,#se+ #$ +"ring t9e -ear are in("+e+ in t9e #ns#(i+ate+ statement #$ ,r#$it #r (#ss an+ #t9er #m,re9ensive in#me $r#m t9e +ate t9e C#m,an- #btains #ntr#( "nit t9e +ate :9en t9e C#m,an- eases t# #ntr#( t9e s"bsi+iar-/ .b0 TSMC7s C#ns#(i+ate+ Statement #$ Cas9 F(#:s s9#:s t9at NT514?@2/= .514?2?/  ?/?0 mi((i#n :as s,ent $#r t9e ,"r9ase #$ $inania( assets an+ NT2=415>/= mi((i#n $#r ,r#,ert- an+ e"i,ment +"ring t9e -ear/


12)#'

BP 12;2

COMPARATI6E ANALSIS PROBLEM

.a0 1/ Cas9 ,r#vi+e+ ."se+0 $#r investing ativities 2/ Cas9 "se+ $#r a,ita( e%,en+it"res .s,en+ing0

Petra F##+s

Nest(Z

3S142? t9#"san+

.CHF140 mi((i#n

5?45>1

=42@

.b0 In N#te 1 t# t9e #ns#(i+ate+ $inania( statements4 Nest(Z states t9at t9e #ns#(i+ate+ $inania( statements #m,rise t9#se #$ Nest(Z S/A/4 an+ #$ its a$$i(iate+ #m,anies4 in("+ing j#int vent"res an+ ass#iates .t9e Gr#",0/ T9e Gr#",7s re$erab(e #,erating segments areY K K

– – – –

[#ne E"r#,e [#ne Amerias [#ne Asia4 Oeania an+ A$ria Nest(Z aters Nest(Z N"triti#n Ot9er


12)#1

BP 12;5

REAL;ORL& FOC3S

Ans:ers :i(( var- +e,en+ing #n #m,an- 9#sen/ T9e $#((#:ing sam,(e s#("ti#n is ,r#vi+e+ $#r Me+tr#ni4 In/ .a0 .b0 .0 .+0 .e0

2 ana(-sts rate+ t9is #m,an-/ >2 #r 2= #$ t9e ana(-sts rate+ it a str#ng b"-/ Average rating 2/2 #n a sa(e #$ 1/ .str#ng b"-0 t# ?/ .str#ng se((0/ Average rating) N# 9ange/ Earnings s"r,rise) 1/5


12)#2

BP 12;=

&ECISION;MA
T9e +#((ar am#"nt reeive+ ",#n t9e sa(e #$ t9e 3M C#m,an- s9ares :as J14=@4/ Sine
1454 1454

Previ#"s earsE"it- Met9#+ S9are Investments///////////////////////////////////////////////////// 5>24 Reven"e $r#m S9are Investments .J142=4 8 50////////////////////////////

5>24

Cas9//////////////////////////////////////////////////////////////////////////// S9are Investments .J==4 8 50///////////////

1524

1524


12)#3

BP 12;= .C#ntin"e+0 T9is earE"it- Met9#+ S9are Investments/////////////////////////////////////////////////// Reven"e $r#m S9are Investments .J?24 8 50///////////////////////////////// Cas9////////////////////////////////////////////////////////////////////////// S9are Investments .J14 8 50/////////////

1?4 1?4D =@4

Sa(e #$ t9e 3M C#m,an- S9ares Cas9 .Cas9 is a ,("g/0///////////////////////////////////////////// 14=@4 L#ss #n Sa(e #$ Investments////////////////////////////////// 1@4 S9are Investments///////////////////////////////////////////

=@4 D

14=@4D

DJ1454  .J5>24  J1?40 K .J1524  J=@40


12)#4

BP 12;?

COMM3NICATION ACTI6IT

&ear Mr/ S9#(es) I am :riting t9is mem# t# ma*e s"ggesti#ns regar+ing t9e a,,r#,riate treatment $#r t9e t:# se"rities -#" are 9#(+ing in -#"r ,#rt$#(i#/ Ass"ming t9at -#"r investment in L#ng(e- In+"stries +#es n#t re,resent a signi$iant interest in t9at $irm4 it s9#"(+ be a#"nte+ $#r as a n#n;tra+ing se"ritbea"se it is a s9are investment t9at -#" +# n#t inten+ #n se((ing in t9e near $"t"re/ #" :i(( n#t re,#rt an- gains #r (#sses #n t9is investment in -#"r in#me statement "nti( -#" se(( it/ On t9e #t9er 9an+4 -#"r +ebt investment s9#"(+ be a#"nte+ $#r as a tra+ing se"rit- sine -#" ,"r9ase+ it :it9 t9e intent t# generate a s9#rt;term ,r#$it/ 3nrea(ie+ gains an+ (#sses at -#"r statement #$ $inania( ,#siti#n +ate s9#"(+ be re,#rte+ in #t9er in#me an+ e%,ense #n t9e in#me statement/


12)#"

BP 12;

ETHICS CASE

.a0 C(assi$-ing t9e se"rities as t9e- ,r#,#se :i(( in+ee+ 9ave t9e e$$et #n net in#me t9at t9e- sa- it :i((/ C(assi$-ing a(( t9e gains as tra+ing se"rities :i(( a"se a(( t9e gains t# $(#: t9r#"g9 t9e in#me statement t9is -ear an+ (assi$-ing t9e (#sses as n#n;tra+ing se"rities :i(( +e$er t9e (#sses $r#m t9is -ear7s in#me statement/ C(assi$-ing t9e gains an+ (#sses j"st t9e #,,#site :i(( 9ave t9e #,,#site e$$et/ .b0 9at ea9 ,r#,#ses is "net9ia( sine it is *n#:ing(- n#t in a#r+ane :it9 IFRS/ T9e $inania( statements are $ra"+"(ent(-4 n#t $air(-4 state+/ T9e a$$ete+ sta*e9#(+ers are #t9er members #$ t9e #m,an-7s #$$iers an+ +iret#rs4 t9e in+e,en+ent a"+it#rs .:9# ma- +etet t9ese misstatements04 t9e s9are9#(+ers4 an+ ,r#s,etive invest#rs/ .0 T9e at #$ se((ing ertain se"rities .t9#se :it9 gains #r t9#se :it9 (#sses0 is management7s 9#ie an+ is n#t ,er se "net9ia(/ A#"nting stan+ar+s a((#: t9e sa(e #$ se(ete+ se"rities s# (#ng as t9e met9#+ #$ assigning #st a+#,te+ b- t9e #m,an- is #nsistent(- a,,(ie+/ I$ t9e #$$iers at in t9e best interest #$ t9e #m,an- an+ its sta*e9#(+ers4 an+ in a#r+ane :it9 IFRS4 an+ n#t in t9eir se($;interest4 t9eir be9avi#r is ,r#bab(- et9ia(/

12)##

Financial Accounting 3e Weygandt Kimmel Kieso

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