Question

Janualy l, IU oes a-Cola record the investment at an Now assume that Coca-Cola Coca-Cola record the investment at January 1,2016? controls Bubbly and reports the acquisition as a merger. How do b. nd $20,000 million in iabilities. leverag vided by total assets, if Coca-Cola reports its investment in ment and as a merger Which reporting choice allows C tor, how do you evaluate Coca-Cola's reporting choice? s. Calculate Coca-Cola's leverage, measured as total liabilities ola reports its investment in Bubbly as a significant influence in c. Assume Coca-Cola's balance sheet just prior to the acquisition consists of $80,000 million in a d. oca-Cola to appear more financially viable? As Coca-Cola PROBLEMS activity P1.1Investments in Trading and AFS Securities A company has the following investment LO 1 during 2016 and 2017 Fair vaiue at Fair value at 12/31/16 Date of Sale Selling Price Date of 12/31/17 Security Type Acquisition Cost A. B Trading N/A N/A $410,000 N/A 6/3/16 $325,000 1/15/17 235,000 225,000 Trading 7/14/16400,000 190,000 N/A 3/5/16 $350,000 $252,000 N/A N/A 213,000 N/A N/A N/A 4/2/17 D. . . _ .. . AFS 8/2/16 11/20/16 175,000 300,000 710,000 250,000 N/A 215,000 690,000 N/A Security E is impaired in 2017, but is not impaired in 2016. Security F is not impaired in 2017 Required a. Prepare the journal entries to record the above information for 2016 and 2017, assuming the company's reporting year ends December 31. Show how statement of comprehensive income for 2016 and 2017 this information is presented in the company's balance sheet, income statement, and LO 1 P1.2 Held-to-Maturity Intercorporate Debt Investments On January 2, 2016, a U.S. company in- vests in the following corporate debt securities, classified as held-to-maturity per ASC Topic 320: 1. 5-year $1,000,000 face value corporate bond paying 6 percent interest annuall

Answer 1

P 1.1 (a)

Journal Entry
Date	Account Heading	Debit	Credit
2016
5/3/2016	Investment in Trading Securities	350,000
	Cash		350,000
5/3/2016	Cash	325,000
	Realised loss- Trading investment	25,000
	Investment in trading securities		350,000
14/7/2016	Investment in trading securities	225,000
	Cash		225,000
2/8/2016	Investment in Available for Sale Securities	175,000
	Cash		175,000
20/11/2016	Investment in Available for Sale Securities	300,000
	Cash		300,000
31/12/2016	Fair value adjustment- Trading Securities	27,000
	Unrealised gain- Trading Investments		27,000
31/12/2016	Unrealised Gain/Loss - Other comprehensive Income	35,000
	Fair value Adjustment-Available for Sale		35,000
2017
15/01/17	Cash	235,000
	Realised loss- Trading investment	17,000
	Investment in trading securities		252,000
2/4/2017	Cash	213,000
	Unrealised Gain/Loss - Other comprehensive Income	15,000
	Investment in Available for Sale Securities		190,000
	Realised Gain- Available for Sale Investments		38,000
6/4/2017	Investment in Available for Sale Securities	710,000
	Cash		710,000
1/9/2017	Investment in trading securities	400,000
	Cash		400,000
31/12/2017	Fair value adjustment- Trading Securities	10,000
	Unrealised gain- Trading securities		10,000
31/12/2017	Unrealised Gain/Loss - Other comprehensive Income	55,000
	Fair value Adjustment-Available for Sale		55,000
31/12/2017	Loss on Impairement- Available for Sale Securities	85,000
	Unrealised Gain/Loss - Other comprehensive Income		85,000

Balance sheet - Partial
as at 31st December,2016
Assets
Cash		$       (725,000)
Short term Investments
Trading investments	$        225,000
Fair Value adjustments- Trading Investments	27,000
		252,000
Lon term Investments
Available for Sale Investments	$        475,000
Fair Value adjustments- Available for Sale Investments	(35,000)
		440,000
Total Assets		$         (33,000)
Liabilities
Shareholder's Equity
Accumulated other comprehensive income	$        (35,000)
Retained Earnings	2,000
		(33,000)
Total Liabilities and Shareholder's Equity		$         (33,000)
Balance sheet - Partial
as at 31st December,2017
Assets
Cash		$   (1,387,000)
Short term Investments
Trading investments	$        400,000
Fair Value adjustments- Trading Investments	10,000
		410,000
Lon term Investments
Available for Sale Investments	$        960,000
Fair Value adjustments- Available for Sale Investments	(55,000)
		905,000
Total Assets		$         (72,000)
Liabilities
Shareholder's Equity
Accumulated other comprehensive income	$        (20,000)
Retained Earnings	(52,000)
		(72,000)
Total Liabilities and Shareholder's Equity		$         (72,000)