Chapter 12

Q1

(12 pts)

Level Company owns bonds of Leader Company. During 2016, the fair value of those bonds increased by $4 million. Interest received and earned was $3 million.

Assume three alternative scenarios: TS, AFS, or HTM. For each scenario indicate the change in total assets and equity, and net income for 2016:

	Trading Securities	Available for Sale	Held to Maturity
Change in total assets
Change in owners equity
Net income

Q2

(12 pts)

On January 2, 2016, Garner, Inc. bought shares in Moody, Inc. for $60 million cash. Moody's net income for the year ended December 31, 2016, was $30 million. During 2016, Moody declared and paid cash dividends of $6 million.

Assume the following two alternative scenarios (10% or 30% ownership) and answer (a) and (b) below:

	Ownership stake of 10% was purchased for $60 million	Ownership stake of 30% was purchased for $60 million
(a) On December 31, 2016, Garner's investment should be reported at:
(b) Assuming there was no change in fair value, what was the total investment revenue (from all sources)

Q3

(6 pts)

Refer to the previous problem: now assume that the $60 million initial investment is now worth $80 million.

	Ownership stake of 10% was purchased for $60 million	Ownership stake of 30% was purchased for $60 million
On December 31, 2016, Garner's investment should be reported at: