Solutions To Exercises and Problems Exercises E1.1 Investment in Trading Securities

CHAPTER 1
SOLUTIONS TO EXERCISES AND PROBLEMS

EXERCISES
E1.1
Investment in Trading Securities
(in millions)
a.
$49 + 32 = $81
b.
Unrealized gains and losses on trading securities are reported in income.
c.
Investment in trading securities
81
Cash
81
Unrealized losses (income)
32
d.
Cash
32
60

Realized gains (income)
E1.2
49
11
Investment in Available-for-Sale Securities
a.
The AFS securities held at the end of 2008 have net unrealized gains of $181 million (= $193 $12), which are reported in AOCI. The unrealized loss on AFS securities for 2008 is $44
million. Therefore $225 million (= $181 + $44) in net unrealized gains must have occurred in
prior years.
b.
Cash
Realized losses (income)
35
5
Investment in AFS securities
Unrealized gains (AOCI)
8
Realized gains (income)
Solutions Manual, Chapter 1
40
Cambridge Business Publishers, 2010

1
E1.3
Held-to-Maturity Investments
Amortization schedule (supports numbers in entries below)

Interest income
Amortization
Investment balance
(4% x beginning
($250,000 interest (beginning balance
investment balance)
income)
amortization)
1/1/2010
$5,222,591
12/31/2010
$208,904
$41,096
5,181,495
12/31/2011
207,260
42,740
5,138,755
12/31/2012
205,550
44,450
5,094,305
12/31/2013
203,772
46,228
5,048,077
12/31/2014
201,923
48,077
5,000,000
January 1, 2010
Investment in HTM
securities
5,222,591
Cash
December 31, 2010

Cash
5,222,591
250,000
Investment income
Investment in HTM securities
December 31, 2011
Cash
208,904
41,096
250,000
Investment income
December 31, 2012
Cash
207,260
42,740
250,000
Investment income
December 31, 2013
Cash
205,550
44,450
250,000
Investment income
December 31, 2014
Cash
203,772
46,228
250,000
Investment income

2
Edition
201,923
48,077
Advanced Accounting, 1st
Cash
5,000,000
E1.4
5,000,000
Investment in Trading, AFS and HTM Securities

2010
Income statement
Investment gains
Investment losses
Interest income
Balance sheet
Assets
Investments-trading
Investments-AFS
Investments-HTM
Equity
AOCI gains (losses)
$ 10,000
(20,000)
380,000
640,000
40,000
2011
2012
$ 25,000
7,778
$ (40,000)
7,849
510,000
196,227
535,000
198,076
(90,000)
35,000
Amortization schedule for HTM investment (supports balances above)

Interest income
Amortization
Investment balance
(4% x beginning
(Interest income (Beginning balance
investment balance)
$6,000)
+ amortization)
1/2/2011
$194,449
12/31/2011
$7,778
$1,778
196,227
12/31/2012
7,849
1,849
198,076
E1.5
Equity Method Investment with Intercompany Sales and Profits
Calculation of 2010 equity in CCEs net income:

Coca-Colas share of CCEs reported income (35% x $1 million)
+ Realized profit on intercompany sales (35% x ($700,000 ($700,000/1.25)))
- Unrealized profit on intercompany sales (35% x ($775,000 ($775,000/1.25)))
Equity in net income of CCE
Entry to record equity in CCEs net income:
Investment in CCE
Equity in income of CCE
$ 350,000
49,000
(54,250)
$ 344,750
344,750
344,750

3
E1.6
Equity Method Investment with Cost in Excess of Book Value
Analysis of acquisition cost (not required):

Acquisition cost
40% x book value
Excess of fair value over book value:
Patents (40% x $4,000,000)
Technology (40% x $1,000,000)
Goodwill
$ 5,000,000
$ 2,400,000
1,600,000
400,000
4,400,000
$ 600,000
Calculation of 2011 equity in Roncos net income:

Revcos share of Roncos reported income (40% x $900,000)
- Amortization of patent undervaluation ($1,600,000/10)
- Amortization of unreported technology ($400,000/5)
Equity in net income of Ronco
Revcos entries for 2011:
January 1, 2011
Investment in Ronco
$ 360,000
(160,000)
(80,000)
$ 120,000
5,000,000
Cash
During 2011
Cash
5,000,000
100,000
Investment in Ronco
December 31, 2011
Investment in Ronco
100,000
120,000
Equity in net income of Ronco

E1.7
120,000
Equity Method and Other Comprehensive Income
Calculation of 2012 equity in net income:

Share of reported net income (25% x $900,000)
-Amortization of intangibles (25% x $2,000,000/4)
Equity in net income
Journal entries for 2012:
Investment in Turner
$225,000
(125,000)
$100,000
6,000,000
Cash
6,000,000
100,000
Equity in income of Turner

Cash
100,000
60,000
4
Edition
60,000
OCI
7,500
E1.8
7,500
Equity Method Investment Cost Computation
Changes in the investment balance in 2010, 2011, and 2012:

2010
40% reported net income
$ 480,000
Amortization of unreported
intangibles (40% x $4,000,000/5)
(320,000)
$ 160,000
Less 40% dividends
(80,000)
Change in investment balance
$ 80,000
2011
$ 600,000
2012
$ 560,000
(320,000)
$ 280,000
(100,000)
$ 180,000
(320,000)
$ 240,000
(92,000)
$ 148,000
Total increase in investment balance = $80,000 + $180,000 + $148,000 = $408,000

January 2, 2010 investment cost = $14,608,000 $408,000 = $14,200,000
E1.9
Joint Venture
(in millions)
Each investor reports the investment on its December 31, 2012 balance sheet at $2,250,000 (=
$2,000,000 + 50% x $500,000).
Each investor reports equity in the joint ventures net income at $250,000 on its 2012 income
statement.
The individual assets and liabilities of the joint venture are not reported separately by the
venturers.
E1.10 Equity Method Investment with Indefinite Life Intangibles Several Years Later
Calculation of 2011 equity in Taylors net income:
Saxtons share of Taylors reported income (25% x $250,000)
- Depreciation of plant and equipment (25% x $1,800,000/15)
Equity in net income of Taylor
$ 62,500
(30,000)
$ 32,500
Note: There is no amortization of the customer database because its life is over. The equity
method does not report impairment losses on indefinite life intangibles.

5
Saxtons entries for 2011:

During 2011
Cash
25,000
Investment in Taylor
25,000
December 31, 2011

32,500
Equity in net income of Taylor
32,500
E1.11 Statutory Merger and Stock Investment (see related E1.10)

(in millions)
a.
Current assets
Plant and equipment
Customer database
Brand names
Goodwill
10.0
51.8
.5
1.5
4.2
Current liabilities
Long-term debt
Cash
b.
16
40
12
12
Cash
12
E1.12 Statutory Merger

(in millions)
Current assets
Plant and equipment
Intangibles
Goodwill
10
40
25
23
Current liabilities
Long-term debt
Cash

6
Edition
12
36
50
PROBLEMS
P1.1
Investments in Marketable Securities
a.
3/5/10
Investment in trading security A
350,000
Cash
350,000
6/3/10
Cash
Loss on sale of trading securities
(income)
325,000
25,000
Investment in trading
security A
350,000
7/14/10
Investment in trading security B
225,000
Cash
225,000
8/2/10
Investment in AFS security D
175,000
Cash
175,000
11/20/10
Investment in AFS security E
300,000
Cash
300,000
12/31/10
Investment in trading security B
27,000
Unrealized gain on trading
securities (income)
27,000
Unrealized loss on AFS securities

(OCI)
50,000
15,000
Unrealized gain on AFS
securities (OCI)
50,000
15,000

7
1/15/11
Cash
Realized loss on trading securities
(income)
235,000
17,000
Investment in trading
security B
4/2/11
Cash
252,000
213,000

Realized gain on AFS
securities (income)
Unrealized gain on AFS
securities (OCI)
190,000
23,000
15,000
Realized gain on AFS

securities (income)
4/6/11
Investment in AFS security F
15,000
710,000
Cash
9/1/11
Investment in trading security C
710,000
400,000
Cash
12/31/11
Investment in trading security C
400,000
10,000
Unrealized gain on trading

securities (income)
Unrealized loss on AFS
securities (OCI)
10,000
35,000

Unrealized loss on AFS
securities (OCI)
20,000
Investment in AFS security F

8
Edition
35,000
20,000
b.
2010 Financial Statements
Balance Sheet, 12/31/10

Assets:
Investments in securities
($225,000 + 175,000 + 300,000 + 27,000 50,000 + 15,000)
Equity:
AOCI
35,000 loss (dr)
Income Statement, 2010

Realized loss
Unrealized gain
Net change in income
2011 Financial Statements
Balance Sheet, 12/31/11
Assets:
Investments in securities ($692,000 252,000 190,000 + 710,000
+ 400,000 + 10,000 35,000 20,000)
(25,000)
27,000
2,000 increase
1,315,000
Equity:
AOCI ($35,000 15,000 35,000 20,000)
Income Statement, 2011
Realized loss
Realized gain ($23,000 + 15,000)
Unrealized gain
Net change in income
692,000
105,000 loss (dr)

$
(17,000)
38,000
10,000
31,000 increase
c.
The valuation of investments on the balance sheet is the same. Each years net losses reported in
AOCI on the balance sheet are instead reported on the income statement.
In 2011, $15,000 of the realized gain on sale of AFS securities is not reported in income, since it
was reported in income in 2010. The $55,000 net unrealized loss on AFS securities recognized
at year-end appears on the income statement.

9
Summary of gains and losses reported in income (not required):

Classified as
AFS
Classified as
Trading
Change in income if
AFS securities
classified as trading
2010 income
Realized loss
Unrealized gain
Unrealized loss
Change in income
$(25,000)
27,000
$ 2,000
$(25,000)
42,000
(50,000)
$(33,000)
$(35,000)
2011 income
Realized loss
Realized gain
Unrealized loss
Unrealized gain
Change in income
$(17,000)
38,000
10,000
$ 31,000
$(17,000)
23,000
(55,000)
10,000
$(39,000)
$(70,000)
By classifying the loss securities as AFS, the company delays reporting the losses in income until
the securities are sold.
P1.2
Held-to-Maturity Intercorporate Debt Investments
a.
Bond #1 pays $60,000 per year in interest and $1,000,000 at maturity.
Cash flow
$60,000
$60,000
$60,000
$60,000
$1,060,000
Total price
Present value calculation

$60,000/1.05
$60,000/(1.05)2
$60,000/(1.05)3
$60,000/(1.05)4
$1,060,000/(1.05)5
Present value
$ 57,143
54,422
51,830
49,362
830,538
$1,043,295
Bond #2 pays $20,000 per year in interest and $500,000 at maturity.

Cash flow
$20,000
$20,000
$20,000
$520,000
Total price
Present value calculation

$20,000/1.05
$20,000/(1.05)2
$20,000/(1.05)3
$520,000/(1.05)4

10
Edition
Present value
$ 19,048
18,141
17,277
427,805
$ 482,271
Amortization tables to support answers to requirements b, c and d:

Bond #1
Interest income
(5% x beginning
investment balance)
1/1/2010
12/31/2010
12/31/2011
12/31/2012
12/31/2013
12/31/2014
Amortization
($60,000 interest
income)
$52,165
51,773
51,362
50,930
50,475
$7,835
8,227
8,638
9,070
9,525
Investment balance
(beginning balance
amortization)
$1,043,295
1,035,460
1,027,233
1,018,595
1,009,525
1,000,000
Bond #2
Interest income
(5% x beginning
investment balance)
1/1/2010
12/31/2010
12/31/2011
12/31/2012
12/31/2013
Amortization
(interest income
$20,000)
$24,114
24,319
24,535
24,761
$4,114
4,319
4,535
4,761
Investment balance
(beginning balance
+ amortization)
$482,271
$486,385
490,704
495,239
500,000
b.
Bond #1
Bond #2
Total interest income
2010
$ 52,165
24,114
$ 76,279
2011
$ 51,773
24,319
$ 76,092
c.
$1,018,595 + $495,239 = $1,513,834
d.
U.S. GAAP indicates that there must be an other than temporary decline in the value of the
security, making it improbable that the bond issuer will be able to make the remaining interest
and principal payments per the bond agreement. Factors indicating impairment loss relate to the
financial health of the bond issuer, such as failure to make payments on other debts and a
significant decline in credit rating.
The December 31, 2013 carrying value for the $1,000,000 bond is $1,009,525. The impairment
loss is $509,525, reported in income.

11
P1.3
Held-to-Maturity Intercorporate Debt Investment, Impairment Losses
a.
Impairment loss
1,100,000
Investments in HTM securities
1,100,000
The loss appears on Hansens income statement.

b.
Find the interest rate X that solves the following equation, where $175,000 = 5% x $3,500,000:
$2,400,000 = $175,000/(1.X) + $175,000/(1.X)2 + $3,675,000/(1.X)3
X = 20%
c.
Interest revenue for 2008 = 20% x $2,400,000 = $480,000
Cash
Investments in HTM
securities
175,000
305,000
Interest revenue
480,000
December 31, 2008 investment balance: $2,400,000 + $305,000 = $2,705,000

d.
Impairment reversals are not reported, per U.S. GAAP.
P1.4
Equity Method Investment Several Years after Acquisition
a.
Calculation of 2012 equity in net income
Better Bottlers net income (45% x $2,500,000)

- Amortization of patents and trademarks revaluation (45% x
($10,000,000/10))
- Amortization of brand names (45% x ($9,000,000/15))
Equity in net income of Better Bottlers
Best Beverages journal entries for 2012:
Investment in Better Bottlers
Equity in net income of
Better Bottlers
Cash (45% x $650,000)
$ 1,125,000
(450,000)
(270,000)
$ 405,000
405,000
405,000
292,500
Investment in Better Bottlers

12
Edition
292,500
b.
Investment balance, January 2, 2009
+ 45% x 2009 to 2012 reported income less dividends (45% x
($25,000,000 $13,000,000))
4 years of revaluation write-offs:
$450,000 x 4
$270,000 x 4
Investment balance, December 31, 2012
P1.5
$ 30,000,000
5,400,000
(1,800,000)
(1,080,000)
$ 32,520,000
Equity Method Investment Several Years after Acquisition
a.
(Calculation of equity in net income for 2010-2011 provided in addition to 2012s calculation,
for use in requirement c.)
Equity in net income calculation
30% x Seaways net income
Write-off of P&E revaluation (30% x $4,000,000/10
each year)
Amortization of intangibles (30% x $6,000,000/2 for
2010 and 2011 only)
2011 ending inventory profit, upstream
(30% x ($925,000 $925,000/1.25))
2011 ending inventory profit, downstream
(30% x ($420,000 $420,000/1.2))
2012 ending inventory profit, upstream
(30% x ($625,000 $625,000/1.25))
2012 ending inventory profit, downstream
(30% x ($696,000 $696,000/1.2))
b.
Investment in Seaway
2010-2011
$ 4,200,000
2012
$1,200,000
240,000
120,000
(1,800,000)
(55,500)
55,500
(21,000)
21,000
(37,500)
_______
$ 2,563,500
1,324,200
Equity in income of Seaway

Unrealized loss (OCI)
1,324,200
240,000
Cash
240,000
450,000
(34,800)
$ 1,324,200
450,000

13
c.
Investment, January 1, 2010
+ Equity in net income, 2010-2011
+ Unrealized gains on AFS securities, 2010-2011 (30% x $1 million)
Dividends, 2010-2011 (30% x $5 million)
+ Equity in net income, 2012
Unrealized losses on AFS securities, 2012 (30% x $800,000)
Dividends, 2012 (30% x $1.5 million)
Investment, December 31, 2012
P1.6
$ 10,000,000
2,563,500
300,000
(1,500,000)
1,324,200
(240,000)
(450,000)
$ 11,997,700
Equity Method Investment with Several Assets in Excess of Book Value
a.
Cambridge has $500,000/$0.50 = 1,000,000 shares outstanding
40% x 1,000,000 = 400,000 shares acquired
b.
Calculation of 2011 equity in net income (in thousands)
Cambridges net income (40% x $1,000)
$ 400
Adjusted for Birminghams share of revaluation write-offs:
Additional cost of goods sold (40% x $300)
(120)
+ Depreciation on revaluation of P&E (40% x $400/20)
8
Amortization of franchises (40% x ($1,300/5))
(104)
Equity in Cambridge net income
$ 184
Note: Because Cambridge uses FIFO, the beginning inventory is completely sold during the
year.
P1.7
Equity Method Investment, Intercompany Sales
(in thousands)
a.
Since none of the merchandise has been sold to outside parties, all intercompany profits are
unconfirmed.
Calculation of 2012 equity in net income:
Jacksons net income (40% x $30,000)
Unconfirmed profit on downstream ending inventory ($65,000
($65,000/1.3))x 40%
Unconfirmed profit on upstream ending inventory ($54,000
($54,000/1.35)) x 40%
Equity in Jacksons net income
14
Edition
$ 12,000
(6,000)
(5,600)
$
400
b.
Sales revenue
Cost of sales
Gross margin
Gross margin %
Harcker Corporation
As reported
Excluding
following U.S. Intercompan
GAAP
y
Transactions
$ 131,000
$ 66,000
110,000
60,000
$ 21,000
$ 6,000
16%
9%
Jackson Corporation
As reported
Excluding
following U.S. Intercompany
GAAP
Transactions
$ 264,000
229,000
$ 35,000
13%
$ 210,000
189,000
$ 21,000
10%
Both corporations report higher gross margins as a percent of sales when they include
intercompany transactions. One could easily make the argument that these intercompany sales
distort the 2012 financial results, since pricing to outside customers only achieves a 9% or 10%
gross margin on sales, while Harckers sales to Jackson achieve a 23% margin [ = ($65,000
50,000)/$65,000] and Jacksons sales to Harcker achieve a 26% margin [ = ($54,000 40,000)/
$54,000].
The equity method removes the investors share of unconfirmed gross profits on upstream and
downstream merchandise sales in the equity method income accrual, but does not adjust each
companys reported sales and cost of sales for intercompany transactions.
Note to instructor: This problem provides an introduction to elimination of unconfirmed
intercompany profits in consolidation, covered in Chapter 6.
P1.8
Equity Investments, Various Reporting Methods
(in thousands)
a.
Balance Sheet, December 31, 2010
Current assets
$ 38,6001
Property, net
450,000
Investment in Quarry (AFS)
1,200
Identifiable intangibles
5,000
_____
Total assets
$ 494,800
2010 Income Statement
Sales revenue
Investment income
Cost of sales
Operating expenses
Net income
1
$38,600 = $40,000 $1,500 + $100
Current liabilities
Long-term liabilities
Capital stock
Retained earnings
AOCI
Total liabilities and equity
20,000
200,000
90,000
185,100
(300)
$ 494,800
$ 900,000
100
(750,000)
(140,000)
$ 10,100

15
b.
Current assets
$ 34,4001
Property, net
450,000
Investment in Quarry
6,8002
5,000
Total assets
$ 496,200
Current liabilities
Capital stock
Retained earnings

Sales revenue
Equity in income of Quarry
Cost of sales
Operating expenses
Net income
1
$34,400 = $40,000 $6,000 + $400
2
$6,800 = $6,000 + (40% x $3,000) - (40% x $1,000)
c.
Current assets
$ 31,0001
Property, net
535,000
5,000
Goodwill
11,0002
Total assets
$ 582,000
20,000
200,000
90,000
186,200
$ 496,200
$ 900,000
1,200
(750,000)
(140,000)
$ 11,200
Current liabilities
Capital stock
Retained earnings

Sales revenue
Cost of sales
Operating expenses
Net income
23,000
281,000
90,000
188,0003
$ 582,000
$ 960,000
(770,000)
(177,000)
$ 13,000
$31,000 = $40,000 $15,000 + $5,000 + $1,000 (dividends)

$11,000 = $15,000 $4,000
3
$188,000 = $185,000 + $3,000
2

16
Edition
P1.9
Joint Venture, Various Reporting Methods
(in millions)
Allen
Corp
$
7.251
210.00
225.00
$ 442.25
Current assets
Plant and equipment, net
Investment in Albarcol Enterprises
Intangibles
Total assets
Current liabilities
Noncurrent liabilities
Capital stock
Retained earnings
24.25
340.00
10.00
68.002
$ 442.25
Barkley
Corp
$ 0.4
65.0
4.23
5.0
$ 74.6
Collins
Corp
$ 0.6
42.0
1.5
$ 44.1
0.2
55.0
1.0
18.44
$ 74.6
0.8
30.0
5.0
8.3
$ 44.1
$7.25 = $1 + [50% x ($0.5 + $12)]

$68 = $67 + (50% x $2)
3
$4.2 = $3.5 + (35% x $2)
4
$18.4 = $17.7 + (35% x $2)
2
Note to instructor: Albarcol reported net income of $2 in 2012; $2 = $12 ending equity balance
- $10 original investment
P1.10 Balance Sheet after Business Acquisition
Wilson Corporation
Balance Sheet
(in millions)
Assets
Current assets
Property and equipment
Intangibles
Goodwill
Total assets
1
20
565
49
131
___
$ 647
Liabilities
Current liabilities
Long-term debt
Total liabilities
Equity
Capital stock
Retained earnings
AOCI
Total equity
27
465
$ 492
$
50
120
(15)
$ 155
$ 647
$13 = $45 ($12 + $15 + $4) + $25 $17 $9

17
P1.11 Business Acquisition

( in thousands)
Cash and receivables
Inventory
Plant and equipment
Other tangible assets
Distribution relationships
Trademarks, copyrights and brands
Other identifiable intangible assets
Goodwill
466
142
21
131
715
834
1,961
1,329
Accounts payable
Cash
Common stock
686
369
4,544
P1.12 Joint Venture Reporting, IFRS

(all dollar amounts in millions)
a.
$2,022 - $1,107 = $915/$2,615 = 35%
or $186/$532 = 35%
b.
Each account balance is calculated as PepsiCos balance plus 35% x PBGs balance, except for
goodwill and equity.
Balance Sheet
Current assets
$ 11,231
Other noncurrent assets
25,965
Goodwill
1,107
Total assets
$ 38,303
Liabilities
$ 21,069
Equity
17,234
$ 38,303
Income Statement
Revenues
$ 44,231
Cost of goods sold
(20,618)
Operating expenses
(17,955)
Net income
$ 5,658
c.
Equity Method
Proportionate Consolidation
Liabilities to assets
$17,394/$34,628 = 50%
$21,069/$38,303 = 55%
Liabilities to equity
$17,394/$17,234 = 101%
$21,069/$17,234 = 122%
PBG is more highly leveraged than PepsiCo. When a proportion of its liabilities are aggregated
with those of PepsiCo, PepsiCo looks more leveraged.
18
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Solutions To Exercises and Problems Exercises E1.1 Investment in Trading Securities

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Solutions To Exercises and Problems Exercises E1.1 Investment in Trading Securities

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CHAPTER 1

SOLUTIONS TO EXERCISES AND PROBLEMS

Investment in Trading Securities

Unrealized losses (income)

Investment in trading securities

Investment in Available-for-Sale Securities

Unrealized gains (AOCI)

Solutions Manual, Chapter 1

Cambridge Business Publishers, 2010

Amortization schedule (supports numbers in entries below)

December 31, 2010

Cambridge Business Publishers, 2010

Advanced Accounting, 1st

Investment in Trading, AFS and HTM Securities

Amortization schedule for HTM investment (supports balances above)

Equity Method Investment with Intercompany Sales and Profits

Calculation of 2010 equity in CCEs net income:

Solutions Manual, Chapter 1

Cambridge Business Publishers, 2010

Equity Method Investment with Cost in Excess of Book Value

Analysis of acquisition cost (not required):

Calculation of 2011 equity in Roncos net income:

Equity in net income of Ronco

Equity Method and Other Comprehensive Income

Calculation of 2012 equity in net income:

Equity in income of Turner

Advanced Accounting, 1st

Equity Method Investment Cost Computation

Changes in the investment balance in 2010, 2011, and 2012:

Total increase in investment balance = $80,000 + $180,000 + $148,000 = $408,000

Solutions Manual, Chapter 1

Cambridge Business Publishers, 2010

Saxtons entries for 2011:

December 31, 2011

E1.11 Statutory Merger and Stock Investment (see related E1.10)

E1.12 Statutory Merger

Cambridge Business Publishers, 2010

Advanced Accounting, 1st

Investments in Marketable Securities

Unrealized loss on AFS securities

Investment in AFS security D

Solutions Manual, Chapter 1

Cambridge Business Publishers, 2010

Investment in AFS security D

Realized gain on AFS

Unrealized gain on trading

Investment in AFS security E

Cambridge Business Publishers, 2010

Advanced Accounting, 1st

2010 Financial Statements

Balance Sheet, 12/31/10

35,000 loss (dr)

Income Statement, 2010

105,000 loss (dr)

Solutions Manual, Chapter 1

Cambridge Business Publishers, 2010

Summary of gains and losses reported in income (not required):

Held-to-Maturity Intercorporate Debt Investments

Bond #1 pays $60,000 per year in interest and $1,000,000 at maturity.

Present value calculation

Bond #2 pays $20,000 per year in interest and $500,000 at maturity.

Present value calculation

Cambridge Business Publishers, 2010