Financial Accounting Ifrs 4th Ed Weigandt ch13

CHAPTER 13
Investments (Revised)
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 13.1
Jan. 1 Financial Assets at Amortized Cost................. 50,000

Cash............................................................ 50,000
July 1 Cash.................................................................... 1,600

Interest Revenue........................................ 1,600
BRIEF EXERCISE 13.2
Aug. 1 Financial Assets at FVTPL—Equity................. 35,700

Cash............................................................ 35,700
Dec. 1 Fair Value Adjustment—FVTPL........................ 4,300

Unrealized Holding Gain or Loss—Income 4,300
(€40,000 − €35,700)
1 Cash.................................................................... 40,000
Financial Assets at FVTPL—Equity.......... 35,700
Fair Value Adjustment—FVTPL................ 4,300
BRIEF EXERCISE 13.3
Dec. 31 Equity Investments (25% X €190,000).............. 47,500

Revenue from Equity Investments........... 47,500
31 Cash (25% X €40,000)........................................ 10,000

Equity Investments.................................... 10,000
Copyright © 2019 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 4e Solutions Manual (For Instructor Use Only) 13-1
BRIEF EXERCISE 13.4
Dec. 31 Unrealized Holding Gain or Loss—Income..... 3,000

Fair Value Adjustment—FVTPL
(₤59,000 – ₤62,000)................................. 3,000
BRIEF EXERCISE 13.5
Statement of Financial Position

Current assets
Financial Assets at FVTPL—Equity................................. ₤59,000
Income Statement
Other income and expense
Unrealized Holding Loss—Income.................................. ₤3,000
BRIEF EXERCISE 13.6
Dec. 31 Unrealized Holding Gain or Loss—Other

Comprehensive Income.................................... 6,000
Fair Value Adjustment—FVTOCI
(R$66,000 – R$72,000)................................. 6,000
BRIEF EXERCISE 13.7

Investments
Financial Assets at FVTOCI—Equity..................................... R$66,000
Equity
Accumulated Other Comprehensive Loss............................ R$6,000
BRIEF EXERCISE 13.8
Investments
Financial Assets at FVTOCI—Equity..................................... ₤115,000
Investment in shares of 20–50% owned company,
at Equity............................................................................... 270,000
Total investments............................................................ ₤385,000
*BRIEF EXERCISE 13.9

Eliminations
Paula Shannon Consolidated
Company Company Dr. Cr. Data
I
nvest mentin
Shannon
Ordinary Shares 190,000 190,000 0
ShareCapi tal
—Or d. 120,000 120,000 0
Retained Earnings 70,000 70,000 0
*BRIEF EXERCISE 13.10

Eliminations
Paula Shannon Consolidated
Company Company Dr. Cr. Data
Investment in
Shannon
Or
di naryShar es 200,000 200,000 0
Excess of Cost
Over Book Value of
Subsidiary 10,000 10,000
Share Capital—Ord. 120,000 120,000 0
Retained Earnings 70,000 70,000 0
SOLUTIONS TO EXERCISES
EXERCISE 13-1
1. Companies purchase investments in debt or share securities because

they have excess cash, to generate earnings from investment income, or
for strategic reasons.
2. A corporation would have excess cash that it does not need for operations
due to seasonal fluctuations in sales and as a result of economic cycles.
3. The typical investment when investing cash for short periods of time
is low-risk, high liquidity, short-term securities such as government-issued
securities.
4. The typical investments when investing cash to generate earnings are

debt securities and share securities.
5. A company would invest in securities that provide no current cash flows

for speculative reasons. They are speculating that the investment will
increase in value.
6. The typical share investment when investing cash for strategic

reasons is shares of companies in a related industry or in an unrelated
industry that the company wishes to enter.
EXERCISE 13-2
(a) 2020
Jan. 1 Financial Assets at Amortized Cost........ 50,000
Cash.................................................... 50,000
Dec. 31 Interest Receivable (₤50,000 × 8%).......... 4,000

Interest Revenue.................................. 4,000
EXERCISE 13-2 (Continued)
2021
Jan. 1 Cash........................................................... 4,000
Interest Receivable............................ 4,000
1 Cash........................................................... 33,500
Financial Assets at Amortized Cost
(₤50,000 X 3/5)................................ 30,000
Gain on Sales of Financial Assets
at Amortized Cost (₤33,500 – ₤30,000) 3,500
(b) Dec. 31 Interest Receivable.................................... 1,600

Interest Revenue (₤20,000 X 8%)...... 1,600
EXERCISE 13-3
January 1, 2020
Financial Assets at FVTOCI—Debt.................................... 70,000
Cash............................................................................. 70,000
December 31, 2020

Interest Receivable (€70,000 X 9%)................................... 6,300
Interest Revenue......................................................... 6,300
December 31, 2020

Fair Value Adjustment—FVTOCI....................................... 525
Unrealized Holding Gain or Loss—Other
Comprehensive Income (€70,525 − €70,000)........ 525
January 1, 2021
Cash..................................................................................... 6,300
Interest Receivable..................................................... 6,300
January 1, 2021
Cash..................................................................................... 40,300
Financial Assets at FVTOCI—Debt
(40/70 X €70,000)...................................................... 40,000
Fair Value Adjustment—FVTOCI (40/70 X €525)....... 300
EXERCISE 13-4
(a) Feb. 1 Financial Assets at FVTPL—Equity......... 6,200

Cash................................................... 6,200
July 1 Cash (600 X ₤1)......................................... 600

Dividend Revenue............................. 600
Sept. 1 Fair Value Adjustment —FVTPL.............. 1,200

Unrealized Holding Gain or Loss
—Income (₤4,300 – ₤3,100)........... 1,200
1 Cash........................................................... 4,300
Financial Assets at FVTPL—Equity
(₤6,200 X 3/6).................................. 3,100
(₤4,300 – ₤3,100)................................ 1,200
Dec. 1 Cash (300 X ₤1)......................................... 300

(b) Dividend revenue and the gain on sale of financial assets at FVTPL─
equity are reported under other income and expense in the
income statement.
EXERCISE 13-5
Jan. 1 Financial Assets at FVTPL—Equity................ 142,100

Cash........................................................... 142,100
July 1 Cash (2,500 X €2.80)......................................... 7,000

Dividend Revenue..................................... 7,000
Dec. 1 Fair Value Adjustment—FVTPL....................... 2,780

—Income (€31,200 – €28,420)............... 2,780
1 Cash................................................................... 31,200
(€142,100 X 1/5)...................................... 28,420
Fair Value Adjustment—FVTPL................ 2,780
Dec. 31 Cash (2,000 X €2.90)......................................... 5,800

Dividend Revenue..................................... 5,800
31 Fair Value Adjustment—FVTPL....................... 9,320

Unrealized Holding Gain or Loss—Income
(€123,000 – €113,680)............................ 9,320
EXERCISE 13-6
February 1
Financial Assets at FVTPL—Equity.................................. 15,400
Cash (500 X €30.80).................................................... 15,400
March 20
Unrealized Holding Gain or Loss—Income...................... 230
Fair Value Adjustment—FVTPL (€2,850 – €3,080) 230
Cash..................................................................................... 2,850
Fair Value Adjustment—FVTPL......................................... 230
(€15,400 X 100/500).................................................. 3,080
April 25
Cash (400 X €1.00).............................................................. 400
Dividend Revenue....................................................... 400
June 15
Fair Value Adjustment—FVTPL......................................... 1,150
(€7,310 – €6,160).................................................. 1,150
Cash..................................................................................... 7,310
(€15,400 X 200/500).................................................. 6,160
Fair Value Adjustment—FVTPL................................. 1,150
July 28
Cash (200 X €1.25).............................................................. 250
Dividend Revenue....................................................... 250
EXERCISE 13-7
(a) Jan. 1 Equity Investments.................................... 180,000

Cash.................................................... 180,000
Dec. 31 Cash (₤36,000 X 25%)................................ 9,000

Equity Investments............................ 9,000
31 Equity Investments.................................... 40,000

Revenue from Equity Investments
(₤160,000 X 25%).............................. 40,000
(b) Investment in Morelli, January 1.......................................... ₤180,000

Less: Dividend received...................................................... 9,000
Plus: Share of reported income.......................................... 40,000
Investment in Morelli, December 31.................................... ₤211,000
EXERCISE 13-8
1. 2020
Mar. 18 Financial Assets at FVTOCI—Equity...... 390,000
Cash (200,000 X 15% X €13)............ 390,000
June 30 Cash.......................................................... 9,000

Dividend Revenue
(€60,000 X 15%)............................. 9,000
Dec. 31 Fair Value Adjustment—FVTOCI............. 60,000
—Other Comprehensive Income
(€450,000 – €390,000)..................... 60,000
2. Jan. 1 Equity Investments.................................. 81,000

Cash (30,000 X 30% X €9)................ 81,000
June 15 Cash.......................................................... 9,000

Equity Investments
(€30,000 X 30%)............................. 9,000
Dec. 31 Equity Investments.................................. 24,000
(€80,000 X 30%)............................. 24,000
EXERCISE 13-9
(a) Since Edna owns more than 50% of the ordinary shares of Damen
Limited, Edna is called the parent company. Damen is the subsidiary
(affiliated) company. Because of its share ownership, Edna has a
controlling interest in Damen.
(b) When a company owns more than 50% of the ordinary shares of
another company, consolidated financial statements are usually
prepared. Consolidated financial statements present the total assets
and liabilities controlled by the parent company. They also present
the total revenues and expenses of the affiliated companies.
(c) Consolidated financial statements are useful because they indicate

the magnitude and scope of operations of the companies under
common control.
EXERCISE 13-10
(a) Dec. 31 Unrealized Holding Gain or Loss—Income. . 4,000

Fair Value Adjustment—FVTPL............. 4,000
(b) Statement of Financial Position

Current assets
Financial Assets at FVTPL—Equity......................... CHF49,000
Income Statement
Unrealized Holding Loss—Income.......................... CHF4,000
EXERCISE 13-11
(a) Dec. 31 Unrealized Holding Gain or Loss—Other

Comprehensive Income............................. 4,000
Fair Value Adjustment—FVTOCI........... 4,000

Investments
Financial Assets at FVTOCI—Equity............................. CHF49,000
Equity
Accumulated Other Comprehensive Loss.............. CHF4,000
(c) Dear Ms. Devonshire:
Investments which are classified as trading (held for sale in the near
term) are reported at fair value in the statement of financial position,
with unrealized gains or losses reported in net income. Share
investments which are classified as non-trading (held longer than
trading) are also reported at fair value, but unrealized gains or losses are
reported in the equity section.
Fair value is used as a reporting basis because it represents the cash

realizable value of the securities. Unrealized gains or losses on trading
investments are reported in the income statement because of the
likelihood that the securities will be sold at fair value in the near term.
Unrealized gains or losses on non-trading securities are reported in
equity rather than in income because there is a significant chance that
future changes in fair value will reverse unrealized gains or losses. So as
to not distort income with these fluctuations, they are reported directly
in equity.
I hope that the preceding discussion clears up any misunderstandings.

Please contact me if you have any questions.
Sincerely,
Student
EXERCISE 13-12
(a) Fair Value Adjustment—FVTPL......................................... 4,000

(€124,000 – €120,000).............................................. 4,000

Comprehensive Income.................................................. 6,000
(€94,000 – €100,000)................................................ 6,000

Current assets
Financial Assets at FVTPL—Equity........................... €124,000
Investments
Financial Assets at FVTOCI—Equity......................... €94,000
Equity
Accumulated Other Comprehensive Loss ............... €6,000
Income Statement
Unrealized Holding Gain—Income............................ €4,000
*EXERCISE 13-13
LENNON ENTERPRISES AND SUBSIDIARY

Worksheet—Consolidated Statement of Financial Position
January 1, 2020
Lennon Ono Eliminations Consolidated
Assets Enterprises Ltd. Dr. Cr. Data
Plant and equipment
(net) 300,000 220,000 520,000
Investment in Ono
Ltd. ordinary
shares 220,000 220,000 0
Current assets 60,000 50,000 110,000
Totals 580,000 270,000 630,000
Equity and liabilities

Share capital—
Lennon Ent. 230,000 230,000
Share capital—
Ono Ltd. 80,000 80,000 0
Retained earnings—
Lennon Ent. 170,000 170,000
Ono Ltd. 140,000 140,000 0
Current liabilities 180,000 50,000 230,000
Totals 580,000 270,000 220,000 220,000 630,000
*EXERCISE 13-14
LENNON ENTERPRISES AND SUBSIDIARY

January 1, 2020
Lennon Ono Eliminations Consolidated
Assets Enterprises Ltd. Dr. Cr. Data
Plant and equipment
(net) 300,000 220,000 520,000
Investment in Ono
Ltd.
ordinary shares 225,000 225,000 0
Cur rentasset s 55,000 50,000 105,000
Excess of cost over
book value 5,000 5,000
Totals 580,000 270,000 630,000

Share capital—
Lennon Ent. 230,000 230,000
Share capital—
Ono Ltd. 80,000 80,000 0
Lennon Ent. 170,000 170,000
Ono Ltd. 140,000 140,000 0
Totals 580,000 270,000 225,000 225,000 630,000
SOLUTIONS TO PROBLEMS
.
PROBLEM 13-1
(a) 2020
Jan. 1 Financial Assets at Amortized Cost..... 2,000,000
Cash................................................ 2,000,000
Dec. 31 Interest Receivable

(HK$2,000,000 X .07).......................... 140,000
Interest Revenue............................ 140,000
2023
Jan. 1 Cash........................................................ 140,000
Interest Receivable........................ 140,000
1 Cash (HK$1,000,000 X 1.05).................. 1,050,000

Financial Assets at Amortized
Cost............................................. 1,000,000
Gain on Sale of Financial Assets
at Amortized Cost....................... 50,000
Dec. 31 Interest Receivable

(HK$1,000,000 X .07).......................... 70,000
Interest Revenue............................ 70,000

Investments
Financial Assets at Amortized Cost.......................... HK$2,000,000
Current assets
Interest Receivable..................................................... HK$ 140,000
PROBLEM 13-2
(a) Feb. 1 Financial Assets at FVTPL—Equity......... 32,400

Cash.................................................... 32,400
Mar. 1 Financial Assets at FVTPL—Equity......... 20,400

Cash.................................................... 20,400
Apr. 1 Financial Assets at FVTPL—Debt............ 50,000

Cash.................................................... 50,000
July 1 Cash (€.60 X 600)....................................... 360

Aug 1 Fair Value Adjustment—FVTPL ............... 600

—Income
(€11,400 − €32,400 X 200/600)....... 600
1 Cash (€57 X 200)........................................ 11,400

(€32,400 X 200/600)........................ 10,800
Fair Value Adjustment—FVTPL........ 600
Sept. 1 Cash (€1 X 800).......................................... 800

Oct. 1 Cash (€50,000 X 7% X 1/2)........................ 1,750

Interest Revenue................................ 1,750
1 Unrealized Holding Gain or Loss

—Income.................................................. 1,000
(€49,000 – €50,000)......................... 1,000
1 Cash........................................................... 49,000
Fair Value Adjustment —FVTPL............... 1,000
Financial Assets at FVTPL—Debt.... 50,000
PROBLEM 13-2 (Continued)
Financial Assets at FVTPL—Equity Financial Assets at FVTPL—Debt

Feb. 1 32,400 Aug. 1 10,800 Apr. 1 50,000 Oct. 1 50,000
Mar. 1 20,400
Dec. 31 Bal. 42,000 Dec. 31 Bal. 0
(b) Dec. 31 Unrealized Holding Gain or Loss

—Income................................................. 800
(€41,200 – €42,000).......................... 800
Security Cost Fair Value

Superior ordinary
shares €21,600 €22,000 (400 X €55)
Pawlik ordinary
shares 20,400 19,200 (800 X €24)
€42,000 €41,200
(c) Current assets

Financial Assets at FVTPL—Equity.................................. €41,200
(d) Income Statement Account Category

Dividend Revenue Other income and expense
—Income Other income and expense
Interest Revenue Other income and expense
PROBLEM 13-3
(a) 2020
Aug. 1 Cash (2,000 X ₤0.70).................................. 1,400

Dividend Revenue............................. 1,400
Sept. 1 Unrealized Holding Gain or Loss—Other

Comprehensive Income.................... 2,000
(₤16,000 – ₤18,000)........................ 2,000
1 Cash (2,000 X ₤8)....................................... 16,000

Fair Value Adjustment—FVTOCI.............. 2,000
Financial Assets at FVTOCI—Equity 18,000
Oct. 1 Fair Value Adjustment—FVTOCI.............. 2,400

—Other Comprehensive Income
(₤26,400 – ₤24,000)......................... 2,400
1 Cash (800 X ₤33)........................................ 26,400

Financial Assets at FVTOCI—Equity
(800 X ₤30)...................................... 24,000
Fair Value Adjustment —FVTOCI..... 2,400
Nov. 1 Cash (1,500 X ₤1)....................................... 1,500

Dec. 15 Cash (1,200 X ₤0.70).................................. 840

31 Cash (3,000 X ₤1)....................................... 3,000

Financial Assets at FVTOCI—Equity

2020 2020
Jan. 1 Balance 135,000 Sept. 1 18,000
Oct. 1 24,000
2020
Dec. 31 Balance 93,000
(b) Dec. 31 Unrealized Holding Gain or Loss—Other

(₤89,400 – ₤93,000)............................. 3,600

Carlene Co. common ₤36,000 ₤38,400 (1,200 × ₤32)
Riverdale Co. common 27,000 24,000 (3,000 × ₤ 8)
Raczynski Co. common 30,000 27,000 (1,500 × ₤18)
₤93,000 ₤89,400
(c) Investments
Financial Assets at FVTOCI—Equity. ₤ 89,400
Equity
Share capital—ordinary................. ₤1,500,000
Retained earnings......................... 1,000,000
Accumulated other comprehensive loss 3,200
Total equity..................................... ₤2,496,800
Unrealized Holding Gain or Loss—Other Comprehensive Income

2020 2020
Jan. 1 Balance 0 Oct. 1 2,400
Sept. 1 2,000
Dec. 31 3,600
2020
PROBLEM 13-4
(a) Jan. 1 Financial Assets at FVTPL—Equity..... 800,000

Cash................................................ 800,000
Mar. 15 Cash........................................................ 13,500

Dividend Revenue
(45,000 X ₤0.30).......................... 13,500
June 15 Cash........................................................ 13,500

Dividend Revenue.......................... 13,500
Sept. 15 Cash........................................................ 13,500

Dec. 15 Cash........................................................ 13,500

31 Fair Value Adjustment—FVTPL............ 280,000

Unrealized Holding Gain or Loss—
Income [(₤24 X 45,000) – ₤800,000] 280,000
(b) Jan. 1 Equity Investments............................... 800,000

Cash................................................ 800,000
Mar. 15 Cash........................................................ 13,500

Equity Investments........................ 13,500
June 15 Cash........................................................ 13,500

Sept. 15 Cash........................................................ 13,500

Dec. 15 Cash........................................................ 13,500

Dec. 31 Equity Investments............................... 96,000

(₤320,000 X 30%)........................ 96,000
(c) Fair Value Equity

Method Method
Equity Investments ₤1,080,000* ₤842,000**

Unrealized Holding Gain—Income 280,000
Dividend Revenue 54,000 0
Revenue from Equity Investments 0 96,000
**₤24 X 45,000 shares

**₤800,000 + ₤96,000 – ₤54,000
PROBLEM 13-5
(a) Jan. 20 Fair Value Adjustment—FVTOCI ............. 2,800

Comprehensive Income
(R$54,800 − R$52,000)................... 2,800
20 Cash........................................................... 54,800
Fair Value Adjustment—FVTOCI...... 2,800
20 Unrealized Holding Gain or Loss—Other

—Other Comprehensive Income........... 2,800
Accumulated Other Comprehensive
Income............................................ 2.800
20 Accumulated Other Comprehensive Income 2,800

Retained Earnings............................. 2,800
28 Financial Assets at FVTOCI—Equity....... 31,680

Cash (400 X R$79.20)........................ 31,680
30 Cash........................................................... 1,470
Dividend Revenue (R$1.05 X 1,400). 1,470
Feb. 8 Cash........................................................... 480

Dividend Revenue (R$0.40 X 1,200). 480
18 Unrealized Holding Gain or Loss—Other

Comprehensive Income........................ 2,040
(R$31,560 − R$33,600)................... 2,040
18 Cash (R$26.30 X 1,200)............................. 31,560

Fair Value Adjustment—FVTOCI............. 2,040
18 Accumulated Other Comprehensive Income 2,040

—Other Comprehensive Income. . 2,040
18 Retained Earnings..................................... 2,040

Accumulated Other Comprehensive Income 2,040
July 30 Cash........................................................... 1,400

Sept. 6 Financial Assets at FVTOCI—Equity....... 49,200

Cash (R$82 X 600)............................. 49,200
Dec. 1 Cash........................................................... 1,350

(b) Financial Assets at FVTOCI—Equity

1/1 Bal. 169,600 1/20 52,000
1/28 31,680 2/18 33,600
9/6 49,200
12/31 Bal. 164,880
(c) Dec. 31 Unrealized Holding Gain or Loss—Other

(R$161,600 – R$164,880).................... 3,280
Accumulated Other Comprehensive Income 3,280

Comprehensive Income...................... 3,280

Elderberry Corporation
ordinary R$ 84,000 R$ 89,600 (1,400 X R$64)
Hachito Corporation
ordinary 80,880 72,000 (1,000 X R$72)
R$164,880 R$161,600
Unrealized Holding Gain or Loss—Other Comprehensive Income

Jan. 1 Balance 0
Jan. 20 2,800 Jan. 20 2,800
Feb. 18 2,040 Feb. 18 2,040
Dec. 31 3,280
(d) Investments
Financial Assets at FVTOCI—Equity............................ R$161,600
Equity
Total share capital and retained earnings................... xxxxx
Accumulated other comprehensive loss..................... 3,280
Total equity............................................................. R$ xxxxx
PROBLEM 13-6
RADAR INDUSTRIES LTD.

December 31, 2020
Assets
Intangible assets
Goodwill........................................................... €200,000
Property, plant, and equipment

Land.................................................... €390,000
Buildings............................................. €950,000
Less: Accumulated depr.—
buildings.......................................... 180,000 770,000
Equipment.......................................... 275,000
Less: Accumulated depr.—
Equipment....................................... 52,000 223,000 1,383,000
Investments
Investments in shares of less than 20%
owned companies, at fair value.................. 286,000
Investment in shares of 20%–50%
owned company, at equity.......................... 380,000 666,000
Current assets
Prepaid Insurance.............................. 16,000
Inventory............................................. 170,000
Accounts receivable.......................... 140,000
Less: Allowance for doubtful
accounts.................................... 6,000 134,000
Short-term investments,
at fair value ................................ 180,000
Cash.................................................... 42,000 542,000
Total assets................................................ €2,791,000
RADAR INDUSTRIES LTD.

Statement of Financial Position (Continued)
December 31, 2020
Equity and Liabilities

Equity
Share capital—ordinary, €10 par value,
500,000 shares authorized
150,000 shares issued and
outstanding.................................€1,500,000
Share premium—ordinary................. 130,000 €1,630,000
Retained earnings……………………. 103,000
Accumulated other comprehensive
income......................................... 8,000 €1,741,000
Non-current liabilities
Bonds payable, 10%, due 2023 540,000
Current liabilities
Notes payable..................................... 70,000
Accounts payable.............................. 240,000
Income taxes payable........................ 120,000
Dividends payable.............................. 80,000 510,000
Total equity and liabilities......................... €2,791,000
*PROBLEM 13-7
(a) 2020
Dec. Equity Investments 1,218,000
31
Current Assets 1,218,000
(b) LIU LIMITED AND SUBSIDIARY

December 31, 2020
Yang Eliminations Consolidated
Assets Liu Limited Plastics Dr. Cr. Data
Plant and equipment
(net) 2,100,000 676,000 84,000 2,860,000
Investment in
Yang Plastics 1,218,00
ordinary shares 1,218,000 0 0
Current assets 262,000 435,500 697,500
Excess of cost over
book value of
subsidiary 115,000 115,000
Totals 3,580,000 1,111,500 3,672,500
Share capital—Liu
Limited 1,950,000 1,950,000
Share capital—Yang
Plastics 525,000 525,000 0
Liu Limited 1,052,000 1,052,000
Yang Plastics 494,000 494,000 0
1,218,00
Tot
als 3,580,000 1,111,500 1,218,000 0 3,672,500
*PROBLEM 13-7 (Continued)
(c) LIU LIMITED AND SUBSIDIARY

Consolidated Statement of Financial Position
December 31, 2020
Assets
Goodwill (¥199,000 − ¥84,000).......................... ¥ 115,000
Plant and equipment, net
(¥2,776,000 + ¥84,000) 2,860,000
Current assets................................................... 697,500
Total assets................................................ ¥3,672,500
Equity and Liabilities

Equity.................................................................
Share capital—ordinary............................ ¥1,950,000
Retained earnings..................................... 1,052,000 ¥3,002,000
Current liabilities............................................... 670,500
Total equity and liabilities.................... ¥3,672,500

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CHAPTER 13

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 13.1

Jan. 1 Financial Assets at Amortized Cost................. 50,000

July 1 Cash.................................................................... 1,600

BRIEF EXERCISE 13.2

Aug. 1 Financial Assets at FVTPL—Equity................. 35,700

Dec. 1 Fair Value Adjustment—FVTPL........................ 4,300

BRIEF EXERCISE 13.3

Dec. 31 Equity Investments (25% X €190,000).............. 47,500

31 Cash (25% X €40,000)........................................ 10,000

Dec. 31 Unrealized Holding Gain or Loss—Income..... 3,000

BRIEF EXERCISE 13.5

Statement of Financial Position

BRIEF EXERCISE 13.6

Dec. 31 Unrealized Holding Gain or Loss—Other

BRIEF EXERCISE 13.7

Statement of Financial Position

*BRIEF EXERCISE 13.9

*BRIEF EXERCISE 13.10

1. Companies purchase investments in debt or share securities because

4. The typical investments when investing cash to generate earnings are

5. A company would invest in securities that provide no current cash flows

6. The typical share investment when investing cash for strategic

Dec. 31 Interest Receivable (₤50,000 × 8%).......... 4,000

(b) Dec. 31 Interest Receivable.................................... 1,600

December 31, 2020

December 31, 2020

(a) Feb. 1 Financial Assets at FVTPL—Equity......... 6,200

July 1 Cash (600 X ₤1)......................................... 600

Sept. 1 Fair Value Adjustment —FVTPL.............. 1,200

Dec. 1 Cash (300 X ₤1)......................................... 300

Jan. 1 Financial Assets at FVTPL—Equity................ 142,100

July 1 Cash (2,500 X €2.80)......................................... 7,000

Dec. 1 Fair Value Adjustment—FVTPL....................... 2,780

Dec. 31 Cash (2,000 X €2.90)......................................... 5,800

31 Fair Value Adjustment—FVTPL....................... 9,320

(a) Jan. 1 Equity Investments.................................... 180,000

Dec. 31 Cash (₤36,000 X 25%)................................ 9,000

31 Equity Investments.................................... 40,000

(b) Investment in Morelli, January 1.......................................... ₤180,000

June 30 Cash.......................................................... 9,000

2. Jan. 1 Equity Investments.................................. 81,000

June 15 Cash.......................................................... 9,000

(c) Consolidated financial statements are useful because they indicate

(a) Dec. 31 Unrealized Holding Gain or Loss—Income. . 4,000

(b) Statement of Financial Position

(a) Dec. 31 Unrealized Holding Gain or Loss—Other

(b) Statement of Financial Position

Fair value is used as a reporting basis because it represents the cash

I hope that the preceding discussion clears up any misunderstandings.

(a) Fair Value Adjustment—FVTPL......................................... 4,000

Unrealized Holding Gain or Loss—Other

(b) Statement of Financial Position

LENNON ENTERPRISES AND SUBSIDIARY

Equity and liabilities

LENNON ENTERPRISES AND SUBSIDIARY

Equity and liabilities

Dec. 31 Interest Receivable