On May 8, 2013, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 610,000 pesos on February 10, 2014. Jett prepares quarterly financial statements on March 31, June 30, September 30, and December 31. The exchange rates for pesos during the time the receivable is outstanding follow. May 8, 2013 $ 0.1873 June 30, 2013 0.1882 September 30, 2013 0.1893 December 31, 2013 0.1876 February 10, 2014 0.1915 Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2013 and the first quarter of 2014.

On May 8, 2013, Jett Company (a U.S. company) made a credit sale to Lopez (a Mexican company). The terms of the sale required Lopez to pay 610,000 pesos on February 10, 2014. Jett prepares quarterly financial statements on March 31, June 30, September 30, and December 31. The exchange rates for pesos during the time the receivable is outstanding follow.

 

May 8, 2013	$	0.1873
June 30, 2013		0.1882
September 30, 2013		0.1893
December 31, 2013		0.1876
February 10, 2014		0.1915

  

Compute the foreign exchange gain or loss that Jett should report on each of its quarterly income statements for the last three quarters of 2013 and the first quarter of 2014.

Compute the amount to be reported on Jett's balance sheets at the end of each of its last three quarters of 2013.

Explanation:

Quarter ended June 30, 2013
May 8 recorded amount (610,000 × $0.1873)	$	114,253
June 30 balance sheet amount (610,000 × $0.1882)		114,802
Foreign exchange gain	$	549

 

Quarter ended September 30, 2013
June 30 balance sheet amount	$	114,802
Sept. 30 balance sheet amount (610,000 × $0.1893)		115,473
Foreign exchange gain	$	671

  

Quarter ended December 31, 2013
Sept. 30 balance sheet amount	$	115,473
Dec. 31 balance sheet amount (610,000 × $0.1876)		114,436
Foreign exchange loss	$	1,037

  

Quarter ended March 31, 2014
Dec. 31 balance sheet amount	$	114,436
Feb. 10, 2014, amount received (610,000 × $0.1915)		116,815
Foreign exchange gain	$	2,379

  

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

$2,562  ($549 + $671 − $1,037 + $2,379).

This amount also equals the difference between the number of dollars finally received ($116,815) and the initial measure of the account receivable ($114,253).  In addition, this amount equals the number of pesos (610,000) owed by the customer times the change in the exchange rate ($0.0042) between the beginning rate ($0.1873) and the ending rate ($0.1915).

Prepare journal entries to record the following transactions involving the short-term securities investments of Natura Co., all of which occurred during year 2013. a. On June 15, paid $156,000 cash to purchase Remedy’s 90-day short-term debt securities ($156,000 principal), dated June 15, that pay 9% interest (categorized as held-to-maturity securities).

Prepare journal entries to record the following transactions involving the short-term securities investments of Natura Co., all of which occurred during year 2013.

a.	On June 15, paid $156,000 cash to purchase Remedy’s 90-day short-term debt securities ($156,000 principal), dated June 15, that pay 9% interest (categorized as held-to-maturity securities).

b. On September 13, received a check from Remedy in payment of the principal and 90 days' interest on the debt securities purchased in transaction a. (Use 360 days in a year. Do not round your intermediate calculations.)   Explanation: b. Collected proceeds of debt securities with interest of $156,000 × 0.09 × 90/360 = $3,510

Ticker Services began operations in 2011 and maintains long-term investments in available-for-sale securities. The year-end cost and fair values for its portfolio of these investments follow. Cost Fair Value December 31, 2011 $ 312,350 $ 302,980 December 31, 2012 356,079 377,444 December 31, 2013 484,267 572,888 December 31, 2014 731,243 650,806 Prepare journal entries to record each year-end fair value adjustment for these securities

Ticker Services began operations in 2011 and maintains long-term investments in available-for-sale securities. The year-end cost and fair values for its portfolio of these investments follow.

  

	Cost		Fair Value
December 31, 2011	$	312,350	$	302,980
December 31, 2012		356,079		377,444
December 31, 2013		484,267		572,888
December 31, 2014		731,243		650,806

  
Prepare journal entries to record each year-end fair value adjustment for these securities
 

Explanation:

Dec. 31, 2011	Record fair value of securities ($312,350 − $302,980) = $9,370
Dec. 31, 2012	Record fair value of securities.
	Fair value adjustment-AFS (LT) = $356,079 − $377,444 = $21,365 net gain ($9,370 prior loss + $21,365 current period gain).
Dec. 31, 2013	Record fair value of securities.
	Fair value adjustment-AFS (LT) = $484,267 − $572,888 = $88,621 net gain ($88,621 current period gain – $21,365 prior gain).
Dec. 31, 2014	Record fair value of securities.
	Fair value adjustment-AFS (LT) = $731,243 − $650,806 = $80,437 net loss ($88,621 prior gain + $80,437 current period loss).

Listed below are a few events and transactions of Kodax Company. 2013 Jan. 2 Purchased 23,000 shares of Grecco Co. common stock for $410,000 cash plus a broker’s fee of $3,200 cash. Grecco Co. has 92,000 shares of common stock outstanding and its policies will be significantly influenced by Kodax. Sept. 1 Grecco declared and paid a cash dividend of $1.70 per share. Dec. 31 Grecco announced that net income for the year is $489,900. 2014 June 1 Grecco declared and paid a cash dividend of $2.30 per share. Dec. 31 Grecco announced that net income for the year is $705,400. Dec. 31 Kodax sold 9,000 shares of Grecco for $330,000 cash. Prepare journal entries to record the above transactions and events of Kodax Company. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to the nearest dollar amount.)

Listed below are a few events and transactions of Kodax Company.
  

2013
Jan.	2		Purchased 23,000 shares of Grecco Co. common stock for $410,000 cash plus a broker’s fee of $3,200 cash. Grecco Co. has 92,000 shares of common stock outstanding and its policies will be significantly influenced by Kodax.
Sept.	1		Grecco declared and paid a cash dividend of $1.70 per share.
Dec.	31		Grecco announced that net income for the year is $489,900.

  

2014
June	1		Grecco declared and paid a cash dividend of $2.30 per share.
Dec.	31		Grecco announced that net income for the year is $705,400.
Dec.	31		Kodax sold 9,000 shares of Grecco for $330,000 cash.

  

Prepare journal entries to record the above transactions and events of Kodax Company. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to the nearest dollar amount.)

 

Explanation:

Jan. 2, 2013	Record purchase of investment ($410,000 + $3,200) = $413,200.
	Long-Term Investments—Grecco:
	Kodax’s investment equals 25% of Grecco’s stock (23,000/92,000).
	Kodax should use the equity method to account for its investment.

    

Sept. 1, 2013

Record receipt of cash dividend (23,000 × $1.70) = $39,100.

    

Dec. 31, 2013

Record equity in investee earnings ($489,900 × (23,000/92,000)) = $122,475.

    

June 1, 2014

Record receipt of cash dividend (23,000 × $2.30) = $52,900.

    

Dec. 31, 2014

Record equity in investee earnings ($705,400 × (23,000/92,000)) = $176,350

    

Dec. 31, 2014

Record sale of investment.

    

Book value (Grecco Co. stock) at 12/31/2014:
Original cost	$	413,200
Less 2013 dividends		(39,100	)
Plus share of 2013 earnings		122,475
Less 2014 dividends		(52,900	)
Plus share of 2014 earnings		176,350
Book value at date of sale	$	620,025
Book value of shares sold ($620,025 × [9,000/23,000])	$	242,618	†

     ^†Rounded to nearest dollar.