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need answer to 6question. 6. Short Answer. The last 5 problems demonstrate the various accounting methods we studied in Chapter 12 to account for Investments.

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6. Short Answer. The last 5 problems demonstrate the various accounting methods we studied in Chapter 12 to account for Investments. Note that in only 2 of these methods (Problems 2 and 4) is the unrealized gain or loss on the investment recorded and reported in the Income Statement. In the other 3 cases, the unrealized gain or loss in generally either not recorded at all Problems 1 and 5), or if it is recorded, it is reported as a component of Other Comprehensive Income ("OCI")(Problem 3). For the 3 cases where the unrealized gain or loss is not generally reported in Net Income (Problems 1, 3, and 5), there were at least two exceptions mentioned in the chapter when an unrealized gain or loss on these investments WOULD be reported in Net Income. Describe briefly those two exceptions? 1. Debt Securities - HTM. Precision Castparts builds sophisticated machinery for the aerospace industry and frequently invests excess cash in corporate bonds, which it holds to maturity. The following transactions relate to Precision's bond investments during 2019. Precision has the positive ability and intent to hold all bonds until maturity, and their year-end is December 31. Apr. 30th: Purchased $16 million of 5% Marmon Corp. bonds at face value. June 30th. Received the $400,000 semiannual interest payment on the Marmon bonds. Oct. 1st: Purchased $10 million of 4% General Re bonds at face value. These bonds pay interest on July 1st and January 1st of each year. Dec. 1st. Sold the Marmon bonds for $16.5 million. Dec. 31st: Prepare any necessary adjusting entries. The fair value of the General Re bonds was $10.2 million. Remember to accrue interest. a. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end. April 30 3. Debt Securities - Trading. Use the same data as Problem 1, but now assume the bonds are classified as Trading Securities. a. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end. Investment in Marmon corp. 16,000,000 cash 16,000,000 cash 400,000 Interest Receivable 400,000 June 30 Oct 1 Investment in cash General Re-bonds 10,000,000 10,000,000 Dec 1 Adjust trading securities to fair value cost 3. Debt Securities - AFS. Use the same data as Problem 1, but now assume the bonds are classified as Available for Sale. a. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end. 4. Equity Securities - Lack Significant Influence (FVTNI). On July 28th 2019, Berkshire Hathaway bought 750,000 shares of Brooks Running Shoes stock for $40 per share. Brooks' Net Income for the year was $1.3 million. Berkshire received dividend payments of $150,000 each on September 30", and December 31st. At December 31st year-end) the stock was worth $42 per share. a. Prepare all appropriate journal entries for this investment for 2019 including any adjusting entries at year-end. July 28th, 19 Investment in Brooks Running snoes 30,000,000 cash 30,000,000 September 30 cash 150,000 150,000 Dividend Revenue 150,000 December 31 Cash 150,000 Wividend Revenue fair value = 42 X 750,000 - $ 31,500,000 Security Book Stock Fair cost 30, 200,000 value Adjustment Fais value 31,500,000 Fair value adjustment bal- 1,500,000 1500,000 1,500,000 December 31 Fair value adjustment unrealized holding 1,500,000 gain-NI 1,500,000 5. Equity Securities - Significant Influence (Equity Method). See's Candies bought 40% of Molly's Ice Cream Co. on January 2, 2019 for 60 million. The carrying value of Molly's assets on that date was $100 million. Book value and fair values were the same for all financial statement items except for inventory and buildings, for which fair value exceeded book value by $5 million and $25 million, respectively. All inventory on hand at the date of acquisition was sold during 2019. The buildings have a remaining life of 10 years. During 2019, Molly reported total Net Income of $30 million and paid dividends of $10 million. The Fair Value of the Investment at the end of 2019 was $63 million. a. Prepare the appropriate journal entries for this investment for 2019. (You can make your JE's in Millions) i. Journal Entry #1 Purchase Investment in Molly's Ice Cream 60 million Cash 60 million Shares 12 million Net Income ii. Journal Entry #2 Investment in maly's Ice Cream Investment Revenue 12 million 4 million Vividend iii. Journal Entry #3 cash Inventory in Molly's Ie-crom shortes 4 milion 2 million Inventory 2 million iv. Journal Entry #4 Investment Revenue (4064 Smillion) Investment in Molly's shares Investment Revenue (40% of 25)/10 Investment in molly's shares Building Imillion 1 million 6. Short Answer. The last 5 problems demonstrate the various accounting methods we studied in Chapter 12 to account for Investments. Note that in only 2 of these methods (Problems 2 and 4) is the unrealized gain or loss on the investment recorded and reported in the Income Statement. In the other 3 cases, the unrealized gain or loss in generally either not recorded at all Problems 1 and 5), or if it is recorded, it is reported as a component of Other Comprehensive Income ("OCI")(Problem 3). For the 3 cases where the unrealized gain or loss is not generally reported in Net Income (Problems 1, 3, and 5), there were at least two exceptions mentioned in the chapter when an unrealized gain or loss on these investments WOULD be reported in Net Income. Describe briefly those two exceptions? 1. Debt Securities - HTM. Precision Castparts builds sophisticated machinery for the aerospace industry and frequently invests excess cash in corporate bonds, which it holds to maturity. The following transactions relate to Precision's bond investments during 2019. Precision has the positive ability and intent to hold all bonds until maturity, and their year-end is December 31. Apr. 30th: Purchased $16 million of 5% Marmon Corp. bonds at face value. June 30th. Received the $400,000 semiannual interest payment on the Marmon bonds. Oct. 1st: Purchased $10 million of 4% General Re bonds at face value. These bonds pay interest on July 1st and January 1st of each year. Dec. 1st. Sold the Marmon bonds for $16.5 million. Dec. 31st: Prepare any necessary adjusting entries. The fair value of the General Re bonds was $10.2 million. Remember to accrue interest. a. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end. April 30 3. Debt Securities - Trading. Use the same data as Problem 1, but now assume the bonds are classified as Trading Securities. a. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end. Investment in Marmon corp. 16,000,000 cash 16,000,000 cash 400,000 Interest Receivable 400,000 June 30 Oct 1 Investment in cash General Re-bonds 10,000,000 10,000,000 Dec 1 Adjust trading securities to fair value cost 3. Debt Securities - AFS. Use the same data as Problem 1, but now assume the bonds are classified as Available for Sale. a. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end. 4. Equity Securities - Lack Significant Influence (FVTNI). On July 28th 2019, Berkshire Hathaway bought 750,000 shares of Brooks Running Shoes stock for $40 per share. Brooks' Net Income for the year was $1.3 million. Berkshire received dividend payments of $150,000 each on September 30", and December 31st. At December 31st year-end) the stock was worth $42 per share. a. Prepare all appropriate journal entries for this investment for 2019 including any adjusting entries at year-end. July 28th, 19 Investment in Brooks Running snoes 30,000,000 cash 30,000,000 September 30 cash 150,000 150,000 Dividend Revenue 150,000 December 31 Cash 150,000 Wividend Revenue fair value = 42 X 750,000 - $ 31,500,000 Security Book Stock Fair cost 30, 200,000 value Adjustment Fais value 31,500,000 Fair value adjustment bal- 1,500,000 1500,000 1,500,000 December 31 Fair value adjustment unrealized holding 1,500,000 gain-NI 1,500,000 5. Equity Securities - Significant Influence (Equity Method). See's Candies bought 40% of Molly's Ice Cream Co. on January 2, 2019 for 60 million. The carrying value of Molly's assets on that date was $100 million. Book value and fair values were the same for all financial statement items except for inventory and buildings, for which fair value exceeded book value by $5 million and $25 million, respectively. All inventory on hand at the date of acquisition was sold during 2019. The buildings have a remaining life of 10 years. During 2019, Molly reported total Net Income of $30 million and paid dividends of $10 million. The Fair Value of the Investment at the end of 2019 was $63 million. a. Prepare the appropriate journal entries for this investment for 2019. (You can make your JE's in Millions) i. Journal Entry #1 Purchase Investment in Molly's Ice Cream 60 million Cash 60 million Shares 12 million Net Income ii. Journal Entry #2 Investment in maly's Ice Cream Investment Revenue 12 million 4 million Vividend iii. Journal Entry #3 cash Inventory in Molly's Ie-crom shortes 4 milion 2 million Inventory 2 million iv. Journal Entry #4 Investment Revenue (4064 Smillion) Investment in Molly's shares Investment Revenue (40% of 25)/10 Investment in molly's shares Building Imillion 1 million