Full file at

Appendix C

Investments and International Operations

QUESTIONS

1.To be classified as current assets, investments must be (i) capable of being converted into cash quickly and (ii) management must intend to sell the investments as a source of cash to satisfy the needs of current operations (within one year or the operating cycle, whichever is longer).

2.Short-term investments in trading securities are reported on the balance sheet at the (fair) market value of the portfolio of trading securities.

3.The $720 difference between the proceeds ($7,500) and the cost ($6,780) is credited to Gain on Sale of Short-Term Investments and reported in the income statement.

  1. The three classes of noninfluential investments in securities are:

a)debt and equity trading securities.

b)debt securities held-to-maturity.

c)debt and equity securities available-for-sale.

The two classes of influential investments in securities are:

a) equity securities giving an investor a significant influence over an investee.

b) equity securities giving an investor control over an investee.

5.To be classified as current assets, investments must be capable of being converted into cash quickly and management must intend to sell the investments as a source of cash to satisfy the needs of current operations. To be classified as longterm, investments must not meet the requirements for short-term investments—not marketable and not intended to be converted into cash. Long-term investments also include funds earmarked for a special purpose, and other assets not used in company operations.

6.Unrealized lossEquity...... ##

Market Adjustment—Available-for-Sale (LT)...... ##

7.The portfolio for investments in available-for-sale securities should be reported on the balance sheet at (fair) market value—this is separated into short- and long-term.

8.The portfolio of long-term investments in debt securities is reported at cost adjusted for amortization of any difference between cost and maturity when the investments are classified as held-to-maturity debt securities.

9.Unrealized holding gains and losses are not reported on the standard income statement for available-for-sale securities. Unrealized gains and losses for these securities are reported in the stockholders’ equity section of the balance sheet. (They can also be reported either in a separate comprehensive income statement or in a combined statement of comprehensive income.)

10.The equity method is used when the investor has a “significant influence” over the investee corporation; i.e., generally when the investor owns 20% or more of the investee's voting stock. The equity method with consolidation is used when the investor has a “controlling influence” over the investee.

11.A company prepares consolidated statements if the company has control over a subsidiary as a result of owning more than 50% of the subsidiary's voting stock.

12A.Two major challenges in accounting for international operations include (1) accounting for sales and purchases that are denominated in a foreign currency, and (2) preparing consolidated financial statements with a foreign subsidiary.

13A.If the foreign exchange rate falls from $1.40 to $1.30 during the time the U.S. company holds a receivable that is denominated in the foreign currency, the U.S. company will incur an exchange loss. The foreign currency unit is worth $1.40 at the time of sale but is worth only $1.30 at the time it is paid to the U.S. company; hence, a loss of $0.10 is incurred for each foreign currency unit owed to the U.S. company.

14A.No. If a sales agreement requires a foreign customer to pay U.S. dollars to the United States seller, the U.S. company is not exposed to the risk of exchange losses or gains.

15.Best Buy reported $33 million in foreign currency adjustments. This is an unrealized loss.

16.Circuit City’s financial statements, including its balance sheet, are all labeled as being consolidated statements.

17.RadioShack had $1.1 million dollars of unrealized losses on securities.

  1. Apple’s return on total assets as of September 30, 2006 is ($ millions):

$1,989/ [($17,205 + $11,516)/2] = 13.9%

QUICK STUDIES

Quick Study C-1 (10 minutes)

[Note: This actively managed (for profit) short-term investment in equity securities would be classified as Trading Securities.]

Apr. 18 / Short-Term Investments—Trading (TXT)...... / 50,900
Cash...... / 50,900
Purchased 600 shares at $84 plus $500 fee.
May 30 / Cash...... / 450
Dividend Revenue...... / 450
Received dividend of $0.75 per share.

Quick Study C-2 (10 minutes)

1.2009

Dec. 31Unrealized Loss—Equity...... 6,000
Market Adjustment—Available-for-Sale (ST)..6,000

To reflect an unrealized loss in market value

of the available-for-sale securities’ portfolio.

2.Both accounts in part (1) are reported on the balance sheet.

  1. The Unrealized Loss is reported as a reduction in the equity section (and in comprehensive income).
  2. The credit balance in the Market Adjustment—Available-for-Sale (ST) account is a contra asset account. It reduces the (cost) balance in the Short-Term Investments—Available-for-Sale account to its market value.

3. 2010

Apr. 6Cash...... 27,000
Gain on Sale of Short-Term Investments....2,000
Short-Term Investments—AFS...... 25,000

To record sale of one-fourth of the available-for-sale

securities. (Cost = $100,000 x 1/4)

Quick Study C-3 (10 minutes)

May 7 / Short-Term Investments—AFS (Felton)...... / 20,400
Cash...... / 20,400
Purchased 200 shares at $100 plus $400 fee.
June 6 / Cash...... / 22,150
Gain on Sale of Short-Term Investments... / 1,750
Short-Term Investments—AFS (Felton).... / 20,400
To record sale of available-for-sale securities.
200 shares at $112 less $250 fee

Quick Study C-4 (10 minutes)

May 9 / Short-Term Investments—AFS (Crayton)...... / 12,200
Cash...... / 12,200
Purchased 400 shares at $30 plus $200 fee.
June 2 / Cash*...... / 6,280
Gain on Sale of Short-Term Investments... / 180
Short-Term Investments—AFS (Crayton)... / 6,100
To record sale of available-for-sale securities. The
original cost is $12,200 x200/400 =$6,100
*(200 x $32) - $120
Dec. 31 / Unrealized Loss – Equity*...... / 500
Market Adjustment—Available-for-Sale (ST)... / 500
To reflect an unrealized loss in market value of
available-for-sale securities.
As of Dec. 31 / Number of Shares / Cost per share / Total Cost / Market Value per share / Total Market Value / Unrealized Loss (Market-Cost)
Crayton / 200 / $30.50 / $6,100 / $28 / $5,600 / $500*

Quick Study C-5 (10 minutes)

True: b, d, f, g

Quick Study C-6 (10 minutes)

1.Equity method

2.Current (or short-term)

3.Interest revenue (or interest earned)

4.Parent, subsidiary

5.Market value (or fair value)

Quick Study C-7 (10 minutes)

July 31 / Cash...... / 2,400
Interest Revenue...... / 2,400
Record interest earned ($80,000 x 6% x 6/12).
Dec.31 / Interest Receivable...... / 2,000
Interest Revenue...... / 2,000
Record interest earned ($2,400 x 5/6).

Quick Study C-8 (10 minutes)

Valuation Method: The (fair) market value method is used to account for this investment in long-term equity securities (AFS portfolio).

2009

May20 /
Long-Term Investments—AFS (BBE)......
/ 1,500,000
Cash...... / 1,500,000
Record purchase of securities.
2010
Aug.5 / Cash...... / 937,500
Long-Term Investments—AFS (BBE)*...... / 750,000
Gain on Sale of Long-Term Investment......
/ 187,500
Record sale of securities. *(½ x $1,500,000)

Quick Study C-9 (10 minutes)

a.
Nov.1 / Cash ...... / 60,000
Long-Term Investment—BBE...... / 60,000
Received cash dividends ($150,000 x 40%).
b.
Dec.31 / Long-Term Investments—BBE...... / 420,000
Earnings from Investment (BBE)...... / 420,000
Record equity in investee earnings
($1,050,000 x 40%).

Quick Study C-10 (10 minutes)

1.
Dec.31 / Unrealized LossEquity...... / 23,000
Market Adjustment—Available-for-Sale (LT).... / 23,000
Record change in value of securities.

2.Each of the accounts used in the entry for (1) would be reported on the balance sheet. The unrealized loss of $23,000 is a reduction in equity. When the Market Adjustment account contains a credit balance as shown here, it serves as a contra asset account. This results in the reporting of the asset (long-term investment) at its market value.

Quick Study C-11 (10 minutes)

Return on total assets =

This ratio provides information to evaluate a company's profitability (efficiency) in using its available assets.

Quick Study C-12 (10 minutes)

Return on Total Assets = Profit margin x Total asset turnover

= x

Component analysis is useful as it allows the determination of whether the return on assets is achieved primarily due to profitability or efficiency of assetusage (or a balanced combination of both). Component analysis often is more useful when computed and examined over a period of several years and when comparisons are made with competitors.

Quick Study C-13A (10 minutes)

Date of Sale

Accounts Receivable...... / 40,600

Sales......

/ 40,600
Record credit sale in value of pounds
(£20,000 x $2.03/£).

Date of Payment

Cash...... / 39,000
Foreign Exchange Loss...... / 1,600
Accounts Receivable...... / 40,600
Cash received on account (£20,000 x $1.95/£).

Quick Study C-14A (10 minutes)

Mar.1 / Account Receivable—Hamac...... / 5,926
Sales...... / 5,926
Record credit sale in value of ringgits
(20,000 ringgits x $0.2963).
Mar.31 / Cash...... / 6,010
Foreign Exchange Gain...... / 84
Accounts Receivable—Hamac...... / 5,926
Cash received on account
(20,000 ringgits x $0.3005).

EXERCISES

Exercise C-1 (25 minutes)

a.
Feb. 15
/ Short-Term Investments—HTM (ACC)...... / 170,000
Cash......
/ 170,000
Purchased 90-day, 8% debt securities.
b.
Mar. 22 / Short-Term Investments—Trading (Ross).... / 17,950
Cash...... / 17,950
Purchased 850 shares of stock for
(850 x $21) + $100 brokerage fee.
c.
May 16 / Cash...... / 173,400
Short-Term Investments—HTM (ACC).... / 170,000
Interest Revenue...... / 3,400
Collected proceeds of debt securities
with interest of $170,000 x .08 x 90/360.
d.
Aug. 1 / Short-Term Investments—AFS (Nita Co.)..... / 70,000
Cash...... / 70,000
Purchased 6-month, 11% debt securities.
e.
Sept. 1 / Cash...... / 935
Dividend Revenue...... / 935
Received dividend on stock (850 x $1.10).
f.
Oct. 8 / Cash*...... / 13,025
Short-Term Investments—Trading (Ross)**. / 8,975
Gain on Sale of Short-Term Investments...... / 4,050
Sold 425 shares of stock.
* [(425 x $31) - $150] **($17,950/2)
g.
Oct. 30 / Cash...... / 1,925
Interest Revenue...... / 1,925
Received cash interest payment
($70,000 x .11 x 90/360).

Exercise C-2 (20 minutes)

1.
2009
Dec. 31 / Market Adjustment—Trading...... / 9,000
Unrealized Gain—Income...... / 9,000
To reflect an unrealized gain in market values of trading securities.

2.The accounts in part (1) are reported on different financial statements.

  1. The $9,000 debit balance in the Market Adjustment—Trading account is an adjunct asset account in the balance sheet. It increases the balance of the Short-Term Investment—Trading account to the securities’ market value of $85,000.
  2. The Unrealized Gain of $9,000 is reported in the Other Revenues and Gains section of the income statement.

3.
2010
Jan. 3 / Cash...... / 40,250
Gain on Sale of Short-Term Investments.. / 2,250
Short-Term Investments—Trading...... / 38,000
To record sale of trading securities.

Exercise C-3 (15 minutes)

Unrealized
Available-for-Sale PortfolioCost MarketGain (Loss)
Verrizano Corporation bonds payable...... $ 81,400$ 92,000
Porter Corporation notes payable...... 54,90047,928
Laverne Company common stock...... 100,500 96,480
$236,800$236,408$(392)
Dec. 31 / Unrealized Loss—Equity...... / 392
Market Adjustment—AFS (ST)...... / 392
To reflect unrealized loss.

Exercise C-4 (30 minutes)

2009

(a) Feb.15 / Short-Term Investments—HTM (Anthem.)...... / 100,000
Cash...... / 100,000
Purchased 90-day, 6% notes.
(b) Mar.22 / Long-Term Investments—AFS (Frain)...... / 25,940
Cash...... / 25,940
Purchased 600 shares of Fran common
stock ([600 x $43] + $140).
(c) May15 / Cash...... / 101,500
Short-Term Investments—HTM (Anthem.)...... / 100,000
Interest Revenue...... / 1,500
Collected proceeds of 6% notes
($100,000 x 6% x 90/360= $1,500).
(d) July30 / Short-Term Investments—Trading (Moto)...... / 30,000
Cash...... / 30,000
Purchased 5% notes, due Jan. 30, 2010.
(e) Sept.1 / Cash...... / 240
Dividend Revenue...... / 240
/ Received dividend on Frain shares
(600 x $0.40).
(f) Oct.8 / Cash*...... / 14,580
Long-Term Investments—AFS (Frain)**...... / 12,970
Gain on Sale of L-T Investments...... / 1,610
Sold 300 shares of Frain stock.
*([300 x $49] - $120) **($25,940/2)
(g) Oct.30 / Cash...... / 375
Interest Revenue...... / 375
Received interest payment on 5% notes
($30,000 x .05 x 3/12).

Exercise C-5 (15 minutes)

Computation of Market Adjustment

Cost / Market Value / Unrealized
Gain (Loss)
Nintendo Co. common stock...... / $ 64,500 / $ 70,305
Unilever Co. bonds payable...... / 25,800 / 23,994
Kellogg Company notes payable...... / 46,440 / 43,654
McDonald's Corp. common stock...... / 87,075 / 82,721
$223,815 / $220,674 / $(3,141)
Dec. 31 / Unrealized Loss—Equity...... / 3,141
Market Adjustment—AFS (ST)...... / 3,141
Record market value adjustment for securities.

Exercise C-6 (15 minutes)

Dec. 31 / Market Adjustment—AFS (LT)...... / 10,515
Unrealized Loss—Equity...... / 6,106
Unrealized Gain—Equity...... / 4,409
Record market (fair) value of AFS securities.
Computation of Market Adjustment
12/31/2008 / 12/31/2009
Cost...... / $67,842 / $73,479
Market value...... / 61,736 / 77,888
Gain (loss)...... / $ (6,106) / $ 4,409
Adjustment = $6,106 + $4,409 = $10,515(recovery of unrealized loss & recording of unrealized gain)

Exercise C-7 (30 minutes)

2007

Dec. 31 / Unrealized Loss—Equity...... / 11,787
Market Adjustment—AFS (LT)...... / 11,787
Record market value of securities ($392,900 - $381,113).
2008
Dec. 31 / Market Adjustment—AFS (LT)*...... / 38,661
Unrealized Loss—Equity...... / 11,787
Unrealized Gain—Equity...... / 26,874
Record market value of securities.
* $447,906 - $474,780 = $26,874 net gain
($11,787 prior loss + $26,874 current period gain).
2009
Dec. 31 / Market Adjustment—AFS (LT)*...... / 84,601
Unrealized Gain—Equity...... / 84,601
Record market value of securities.
* $609,152 - $720,627 = $111,475 net gain
($111,475 current period gain - $26,874 prior gain).
2010
Dec.31 / Unrealized Loss—Equity...... / 101,180
Unrealized Gain—Equity...... / 111,475
Market Adjustment—AFS (LT)*...... / 212,655
Record market value of securities.
* $919,820 - $818,640 = $101,180 net loss
($111,475 prior gain + $101,180 current period loss).

Exercise C-8 (15 minutes)

1.Classification of Investments in Securities

a.The Beeman Company bonds are a long-term investment in held-to-maturity debt securities.

b.The Baybridge stock is a long-term investment in equity securities where the investor has a significant influence over the investee.

c.The Carroll stock is a long-term investment in available-for-sale equity securities.

d.The Newtech stock is a long-term investment in available-for-sale equity securities.

e.Since the Flock stock is marketable and is held as an investment of cash available for operations, it is a current asset.

2.Market Adjustment entry at December 31, 2009
Dec. 31 / Market Adjustment—AFS (LT)...... / 12,454
Unrealized GainEquity...... / 12,454
Record market value of securities ($282,730 - $295,184).
Long-term AFS securities / Cost / Market Value
Carroll common stock...... / $181,692 / $195,864
Newtech common stock...... / 101,038 / 99,320
Totals...... / $282,730 / $295,184

Exercise C-9 (30 minutes)

2009

Jan. 2 / Long-Term Investments—Altus*...... / 376,650
Cash...... / 376,650
Record purchase of investment ($374,000 + $2,650).

*Kareen’s investment equals 40% of Altus’ stock (55,000/137,500). Kareen should use the equity method to account for its investment.

Sept. 1 / Cash...... / 167,750
Long-Term Investments—Altus...... / 167,750
Record receipt of cash dividend (55,000 x $3.05).
Dec.31 / Long-Term Investments—Altus...... / 442,760
Earnings from Long-Term Investment...... / 442,760
Record equity in investee earnings
($1,106,900x 40%).
2010
June 1 / Cash...... / 181,500
Long-Term Investments—Altus...... / 181,500
Record receipt of cash dividend (55,000 x $3.30).
Dec.31 / Long-Term Investments—Altus...... / 496,360
Earnings from Long-Term Investment...... / 496,360
Record equity in investee earnings
($1,240,900 x 40%).
Dec. 31
/ Cash...... / 294,250
Gain on Sale of Investments...... / 100,946
Long-Term Investments—Altus*...... / 193,304
Record sale of investment.
* Book value (Altus stock) at 12/31/2010:
Original cost...... / $376,650
Less 2009 dividends...... / (167,750)
Plus share of 2009 earnings...... / 442,760
Less 2010 dividends...... / (181,500)
Plus share of 2010 earnings...... / 496,360
Book value at date of sale...... / $966,520
Book value of shares sold ($966,520 x [11,000/55,000])...... / $193,304

Exercise C-10 (15 minutes)

2009 return on total assets 2010 return on total assets

= 14.3% = 10.9%

Interstate Industries appears to be less efficient in the use of its total assets in 2010 than in 2009 as suggested by the decline in return on total assets from 14.3% to 10.9%. However, without additional information, it is not possible to determine whether Interstate is within the normal range as compared to similar companies. In addition, conditions may exist that explain the apparent decline in efficiency between 2009 and 2010. For example, Interstate may have increased its investment in plant assets in 2010 in anticipation of increased production and sales in 2011. Or, its competitors’ returns may have fallen even more than that of Interstate’s returns.

Exercise C-11A (25 minutes)

2009
Dec. 16 / Accounts ReceivableBerton Ltd...... / 40,650
Sales...... / 40,650
Record credit sales (20,000 x $2.0325).
Dec. 31 / Foreign Exchange Loss*...... / 66
Accounts ReceivableBerton Ltd...... / 66
Record year-end adjustment.

*Original measure = (20,000 x $2.0325)=$40,650

Year-end measure = (20,000 x $2.0292)= 40,584

Loss for the period =$ 66

2010

Jan. 15 / Cash (20,000 x $2.0340)...... / 40,680
Accounts ReceivableBerton Ltd...... / 40,584
Foreign Exchange Gain*...... / 96
Record cash receipt on account.

*Year-end measure = (20,000 x $2.0292)=$40,584

Final measure = (20,000 x $2.0340)= 40,680

Gain for the period =$ 96

Exercise C-12A (25 minutes)

Quarter ended June 30, 2009
May 8 recorded amount (850,000 x $0.0932)...... / $79,220
June 30 balance sheet amount (850,000 x $0.0941)..... / 79,985
Unrealized gain reported on income statement ...... / $ 765
Quarter ended September 30, 2009
June 30 balance sheet amount...... / $79,985
Sept. 30 balance sheet amount (850,000 x $0.0952).... / 80,920
Unrealized gain reported on income statement...... / $ 935
Quarter ended December 31, 2009
Sept. 30 balance sheet amount...... / $80,920
Dec. 31 balance sheet amount (850,000 x $0.0935)..... / 79,475
Unrealized loss reported on income statement...... / $ 1,445
Quarter ended March 31, 2010
Dec. 31 balance sheet amount ...... / $79,475
Feb. 10, 2010, amount received (850,000 x $0.0974) .... / 82,790
Realized gain reported on income statement...... / $ 3,315

Note — The combined net gain for all four quarters equals:

$3,570 ($765 + $935 - $1,445 + $3,315).

This amount also equals the difference between the number of dollars finally received ($82,790) and the initial measure of the account receivable ($79,220). In addition, this amount equals the number of pesos (850,000) owed by the customer times the change in the exchange rate ($0.0042) between the beginning rate ($0.0932) and the ending rate ($0.0974).

PROBLEM SET A

Problem C-1A (60 minutes)

Part 1

2009
Jan. 20 / Short-Term Investments—Trading (Ford)...... / 20,920
Cash...... / 20,920
Purchased Ford Motor Co.
shares [(800 x $26.00) + $120].
Feb. 9 / Short-Term Investments—Trading (Lucent)... / 101,978
Cash...... / 101,978
Purchased Lucent shares
[(2,600 x $39.00) + $578].
Oct. 12 / Short-Term Investments—Trading (Z-Seven)... / 6,200
Cash......
/ 6,200
Purchased Z-Seven shares
[(800 x $7.50) + $200].
2010
Apr. 15 / Cash...... / 23,700
Gain on Sale of Short-Term Investments.. / 2,780
Short-Term Investments—Trading (Ford).. / 20,920
Sold Ford Motor shares
[(800 x $30.00) - $300].
July 5 / Cash...... / 8,697
Gain on Sale of Short-Term Investments..
/ 2,497
Short-Term Investments—Trading (Z-Seven).. / 6,200
Sold Z-Seven shares
[(800 x $11.00) - $103].
22 / Short-Term Investments—Trading (Hunt)..... / 78,444
Cash......
/ 78,444
Purchased Hunt shares
[(2,000 x $39.00) + $444].
Aug. 19 / Short-Term Investments—Trading (D.Karan)... / 31,490
Cash......
/ 31,490
Purchased Donna Karan shares
[(1,600 x $19.50) + $290].

Problem C-1A (Concluded)

2011
Feb. 27 / Short-Term Investments—Trading (HCA)...... / 108,920
Cash...... / 108,920
Purchased HCA shares
[(3,500 x $31.00) + $420].
Mar. 3 / Cash...... / 69,750
Loss on Sale of Short-Term Investments...... / 8,694
Short-Term Investments—Trading (Hunt).. / 78,444
Sold Hunt shares [(2,000 x $35.00) - $250].
June 21 / Cash...... / 95,130
Loss on Sale of Short-Term Investments.... / 6,848
Short-Term Investments—Trading (Lucent).. / 101,978
Sold Lucent shares [(2,600 x $36.75) - $420].
30 / Short-Term Investments—Trading (B&D)..... / 62,345
Cash......
/ 62,345
Purchased Black & Decker shares
[(1,300 x $47.50) + $595].
Nov. 1 / Cash...... / 30,891
Loss on Sale of Short-Term Investments.... / 599
Short-Term Investments—Trading (D.Karan).. / 31,490
Sold Donna Karan shares
[(1,600 x $19.50) - $309].

Part 2 (Adjusting entry at Dec. 31, 2011)

Dec. 31 / Market Adjustment—Trading*...... / 785
Unrealized Gain—Income...... / 785
To reflect an unrealized gain in market values of trading securities.

* Market adjustment computations

Trading securities’ portfolio / Shares / Share Price at 12/31/11 / Market Value / Cost / Unrealized Gain (Loss)
HCA...... / 3,500 / $33.00 / $115,500 / $108,920 / $ 6,580
Black and Decker...... / 1,300 / $43.50 / 56,550 / 62,345 / (5,795)
Totals...... / $172,050 / $171,265 / $ 785

Problem C-2A (40 minutes)

Part 1

2009
Apr. 16 / Short-Term Investments—AFS (Gem)...... / 238,440
Cash...... / 238,440
Purchased 8,000 shares of Gem
[(8,000 x $29.75) + $440].
May. 1 / Short-Term Investments—AFS (T-bills)...... / 125,000
Cash...... / 125,000
Purchased U.S. Treasury bills.
July 7 / Short-Term Investments—AFS (Pepsi)...... / 191,410
Cash...... / 191,410
Purchased 4,000 shares of PepsiCo
[(4,000 x $47.75) + $410].
20 / Short-Term Investments—AFS (Xerox)...... / 39,990
Cash...... / 39,990
Purchased 2,000 shares of Xerox
[(2,000 x $19.75) + $490].
Aug. 3 / Cash...... / 126,250
Short-Term Investments—AFS (T-bills)...... / 125,000
Interest Revenue...... / 1,250
Proceeds of U.S. Treasury bills
($125,000 x .04 x 3/12).
15 / Cash...... / 7,200
Dividend Revenue...... / 7,200
Received dividends on Gem (8,000 x $0.90).
28 / Cash*...... / 145,750
Short-Term Investments—AFS (Gem)**...... / 119,220
Gain on Sale of Short-Term Investments...... / 26,530
Sold 2,000 shares of Gem.
*(4,000 x $36.50) - $250 **($238,440 x 4,000/8,000)
Oct. 1 / Cash...... / 7,000
Dividend Revenue...... / 7,000
Received dividends on PepsiCo (4,000 x$1.75).
Dec. 15 / Cash...... / 4,200
Dividend Revenue...... / 4,200
Received dividends on Gem (4,000 x $1.05).
31 / Cash...... / 5,200
Dividend Revenue...... / 5,200
Received dividends on PepsiCo (4,000 x$1.30).

Problem C-2A (Continued)

Part 2

Comparison of Cost and Market Values for AFS Portfolio

Unrealized
Cost Market Gain (Loss)
Gem Co.(4,000 x $29.75) + 220a...... $119,220
4,000 x $32.00...... $ 128,000
PepsiCo(4,000 x $47.75) + 410b...... 191,410
4,000 x $45.00...... 180,000

Xerox(2,000 x $19.75) + 490c...... 39,990