SOL.-MAN._CHAPTER-9_INVESTMENTS_IA-PART-1A.docx - Chapter 9 Investments PROBLEM 1 TRUE OR FALSE 1 FALSE 2 TRUE 3 FALSE 4 TRUE 5 TRUE 6 FALSE 7 FALSE 8

SOL.-MAN._CHAPTER-9_INVESTMENTS_IA-PART-1A.docx - Chapter 9...

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Chapter 9 Investments PROBLEM 1: TRUE OR FALSE 1. FALSE 2. TRUE 3. FALSE 4. TRUE 5. TRUE 6. FALSE 7. FALSE 8. FALSE 9. FALSE 10. FALSE PROBLEM 2: FOR CLASSROOM DISCUSSION 1. D 2. C 3. D 4. B 5. A 6. B 7. Solutions: Case #1: Answer: (120 – 35) = 85 Case #2: The most advantageous market is determined as follows: Active market #1 Active market #2 Market price 100 120 Transaction costs (5) (5) Transport costs (10) (35) Amount received from sale 85 80 1
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Answer: (100 – 10) = 90 8. Answer: 2.00 – level 2 input 9. B 10. B 11. Solutions: Requirement (a): 1/1/x1 Held for trading securities (12,000 x 3) 36,000 Commission expense 1,800 Cash in bank 37,800 12/31/x1 Held for trading securities [(12,000 x 5) – 36,000] 24,000 Unrealized gain – P/L 24,000 1/6/x1 Cash [(12,000 x 8) – 4,800] 91,200 Held for trading securities (12,000 x 5) 60,000 Realized gain 31,200 Requirement (b): 1/1/x1 Held for trading securities (12,000 x 3) 36,000 Commission expense 1,800 Cash in bank 37,800 12/31/x1 Fair value adjustment [(12,000 x 5) – 36,000] 24,000 Unrealized gain – P/L 24,000 1/6/x1 Cash [(12,000 x 8) – 4,800] 91,200 Fair value adjustment 24,000 Held for trading securities (12,000 x 3) 36,000 Realized gain – P/L 31,200 Requirement (c): 1/1/x1 Investment in FVOCI securities [(12,000 x 3) + 1,800] 37,800 Cash in bank 37,800 12/31/x1 Investment in equity securities - FVOCI 22,200 Unrealized gain – OCI [(12,000 x 5) – 37,800] 22,200 2
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1/6/x1 Investment in equity securities - FVOCI 31,200 Unrealized gain – OCI 31,200* *(12,000 x 8) – 4,800 = 91,200 – 60,000 = 31,200 Cash [(12,000 x 8) – 4,800] 91,200 Investment in equity securities - FVOCI (12,000 x 5) 91,200 Unrealized gain – OCI 53,400
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