14th Edition

ISBN: 9781305088436

Author: Carl Warren, Jim Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Textbook Question

Chapter 15, Problem 4PA

O’Brien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December 31, 2017 and 2016 follow. Selected missing balances are shown by letters.

Chapter 15, Problem 4PA, OBrien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December , example 1

Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, 2016, are as follows:

Chapter 15, Problem 4PA, OBrien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December , example 2

Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding shares of Jolly Roger Co. The following selected investment transactions occurred during 2017:

May 5.	Purchased 3,080 shares of Gozar Inc. at $30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security.
Oct. 1.	Purchased $40,000 of Nightline Co. 6%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1.
9.	Dividends of $12,500 are received on the Jolly Roger Co. investment.
Dec. 31.	Jolly Roger Co. reported a total net income of $112,000 for 2017. O’Brien Industries Inc. recorded equity earnings for its share of Jolly Roger Co. net income.
31.	Accrued three months of interest on the Nightline bonds.
31.	Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts:

Chapter 15, Problem 4PA, OBrien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December , example 3

31.	Closed the O’Brien Industries Inc. net income of $146,230. O’Brien Industries Inc. paid no dividends during the year.

Instructions

Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution & Answer

Chapter 15 Solutions

Financial Accounting

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Solution Summary: The author identifies available-for-sale securities as short-term investments in debt and equity securities with an intention of holding the investment for strategic purposes like meeting liquidity needs, or managing interest risk.

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Chapter 15 Solutions