ill  in the dollar changes caused in the Investment account and Dividend Revenue or Investment Revenue account by each of the following transactions, assuming Crane Company uses (a) the fair value method and (b) the equity method for accounting for its investments in Hudson Company.  (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any answer field blank. Enter 0 for amounts.) (a) Fair Value Method (b) Equity Method Transaction Investment Account Dividend Revenue Investment Account Investment Revenue 1. At the beginning of Year 1, Crane bought 25% of Hudson's common stock at its book value. Total book value of all Hudson's common stock was $850,000 on this date. 2. During Year 1, Hudson reported $54,000 of net income and paid $27,000 of dividends. 3. During Year 2, Hudson reported $31,500 of net income and paid $20,000 of dividends. 4. During Year 3, Hudson reported a net loss of $12,000 and paid $3,800 of dividends. 5. Indicate the Year 3 ending balance in the Investment account, and cumulative totals for Years 1, 2, and 3 for dividend revenue and investment revenue. Exercise 122 (Part Level Submission) The following information is available for Irwin Company for 2018: Net Income $119,000 Realized gain on sale of available-for-sale debt securities 10,000 Unrealized holding gain arising during the period on available-for-sale debt securities 30,000 Reclassification adjustment for gains included in net income 7,500 (a) Determine other comprehensive income for 2018. Other comprehensive income $ Exercise 123 On January 2, 2018, Tylor Company issued a 4-year, $600,000 note at 8% fixed interest, interest payable semiannually. Tylor now wants to change the note to a variable rate note. As a result, on January 2, 2018, Tylor Company enters into an interest rate swap where it agrees to receive 8% fixed and pay LIBOR of 5.5% for the first 6 months on $600,000. At each 6-month period, the variable interest rate will be reset. The variable rate is reset to 6.6% on June 30, 2018. Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2018. Net interest expense $ LINK TO TEXT Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2018. Net interest expense $ Brief Exercise 17-2 Pina Company purchased, on January 1, 2017, as an available-for-sale security, $65,000 of the 8%, 5-year bonds of Chester Corporation for $60,072, which provides  an  10% return. Prepare Pina’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $61,750.  (Round answers to 0 decimal places, e.g. 1,225..

1. ill
in the dollar changes caused in the Investment account and
Dividend Revenue or Investment Revenue account by each of
the following transactions, assuming Crane Company uses (a)
the fair value method and (b) the equity method for accounting
for its investments in Hudson Company.
(Enter negative amounts using either a negative sign preceding
the number e.g. -45 or parentheses e.g. (45). Do not leave any
answer field blank. Enter 0 for amounts.)
(a) Fair Value Method
(b) Equity Method
Transaction
Investment Account
Dividend Revenue
Investment Account
Investment Revenue
1.
At the beginning of Year 1, Crane bought 25% of Hudson's
common stock at its book value. Total book value of all
Hudson's common stock was $850,000 on this date.

2. 2.
During Year 1, Hudson reported $54,000 of net income and paid
$27,000 of dividends.
3.
During Year 2, Hudson reported $31,500 of net income and paid
$20,000 of dividends.
4.
During Year 3, Hudson reported a net loss of $12,000 and paid
$3,800 of dividends.

3. 5.
Indicate the Year 3 ending balance in the Investment account,
and cumulative totals for Years 1, 2, and 3 for dividend revenue
and investment revenue.
Exercise 122 (Part Level Submission)
The following information is available for Irwin Company for
2018:
Net Income
$119,000
Realized gain on sale of available-for-sale debt securities
10,000
Unrealized holding gain arising during the period on available-
for-sale debt securities

4. 30,000
Reclassification adjustment for gains included in net income
7,500
(a)
Determine other comprehensive income for 2018.
Other comprehensive income
$
Exercise 123
On January 2, 2018, Tylor Company issued a 4-year, $600,000
note at 8% fixed interest, interest payable semiannually. Tylor
now wants to change the note to a variable rate note. As a
result, on January 2, 2018, Tylor Company enters into an
interest rate swap where it agrees to receive 8% fixed and pay
LIBOR of 5.5% for the first 6 months on $600,000. At each 6-
month period, the variable interest rate will be reset. The
variable rate is reset to 6.6% on June 30, 2018.

5. Compute the net interest expense to be reported for this note
and related swap transaction as of June 30, 2018.
Net interest expense
$
LINK TO TEXT
Compute the net interest expense to be reported for this note
and related swap transaction as of December 31, 2018.
Net interest expense
$
Brief Exercise 17-2
Pina Company purchased, on January 1, 2017, as an available-
for-sale security, $65,000 of the 8%, 5-year bonds of Chester
Corporation for $60,072, which provides
an
10% return.
Prepare Pina’s journal entries for (a) the purchase of the
investment, (b) the receipt of annual interest and discount
amortization, and (c) the year-end fair value adjustment.
(Assume a zero balance in the Fair Value Adjustment account.)
The bonds have a year-end fair value of $61,750.
(Round answers to 0 decimal places, e.g. 1,225.
Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select

6. "No Entry" for the account titles and enter 0 for the amounts.)
No.
Account Titles and Explanation
Debit
Credit
(a)
(b)
(c)
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Brief Exercise 17-5
Bridgeport Corporation purchased 440 shares of Sherman Inc.
common stock for $12,000 (Bridgeport does not have significant
influence). During the year, Sherman paid a cash dividend of
$3.25 per share. At year-end, Sherman stock was selling for
$34.50 per share.
Prepare Bridgeport’ journal entries to record (a) the purchase of
the investment, (b) the dividends received, and (c) the fair value
adjustment. (Assume a zero balance in the Fair Value
Adjustment account.)
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

7. (c)
Brief Exercise 17-7
Riverbed Corporation purchased for $270,000 a 30% interest in
Murphy, Inc. This investment enables Riverbed to exert
significant influence over Murphy. During the year, Murphy
earned net income of $188,000 and paid dividends of $66,000.
Prepare Riverbed’s journal entries related to this investment.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Account Titles and Explanation
Debit
Credit
(To record the purchase.)
(To record the net income.)
(To record the dividend.)
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Brief Exercise 17-11
Sage Company invests $10,300,000 in 5% fixed rate corporate
bonds on January 1, 2017. All the bonds are classified as
available-for-sale and are purchased at par. At year-end, market
interest rates have declined, and the fair value of the bonds is
now $10,790,000. Interest is paid on January 1.
Prepare journal entries for Sage Company to (a) record the
transactions related to these bonds in 2017, assuming Sage does

8. not elect the fair option; and (b) record the transactions related
to these bonds in 2017, assuming that Sage Company elects the
fair value option to account for these bonds.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
No.
Date
Account Titles and Explanation
Debit
Credit
(a)
(To record interest revenue)
(To record fair value adjustment)
No.
Date
Account Titles and Explanation

9. Debit
Credit
(b)
(To record interest revenue)
(To record fair value adjustment)
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Brief Exercise 17-13
Presented below are two independent cases related to available-
for-sale debt investments.
Case 1
Case 2
Amortized cost
$42,140

10. $101,000
Fair value
32,010
111,120
Expected credit losses
26,930
93,580
For each case, determine the amount of impairment loss, if any.
(If no loss, please enter 0. Do not leave any fields blank.)
Case 1
Impairment Loss
$
Case 2
Impairment Loss
$
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Exercise 17-3 (Part Level Submission)
On January 1, 2017, Whispering Company purchased 10% bonds
having a maturity value of $340,000, for $367,149.34. The
bonds provide the bondholders with
a
8% yield. They are dated January 1, 2017, and mature January

11. 1, 2022, with interest receivable January 1 of each year.
Whispering Company uses the effective-interest method to
allocate unamortized discount or premium. The bonds are
classified in the held-to-maturity category.
(a)
Prepare the journal entry at the date of the bond purchase.
(Enter answers to 2 decimal places, e.g. 2,525.25.
Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2017
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Exercise 17-9 (Part Level Submission)
At December 31, 2017, the available-for-sale debt portfolio for
Grouper, Inc. is as follows.

12. Security
Cost
Fair Value
Unrealized
Gain (Loss)
A
$20,125
$17,250
$(2,875
)
B
14,375
16,100
1,725
C
26,450
29,325
2,875
Total
$60,950

13. $62,675
1,725
Previous fair value adjustment balance—Dr.
460
Fair value adjustment—Dr.
$1,265
On January 20, 2018, Grouper, Inc. sold security A for $17,365.
The sale proceeds are net of brokerage fees.
(a)
Prepare the adjusting entry at December 31, 2017, to report the
portfolio at fair value.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Account Titles and Explanation
Debit
Credit
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14. Exercise 17-12
The following are two independent situations.
Situation 1
Riverbed Cosmetics acquired 10% of the 196,000 shares of
common stock of Martinez Fashion at a total cost of $12 per
share on March 18, 2017. On June 30, Martinez declared and
paid $69,400 cash dividend to all stockholders. On December
31, Martinez reported net income of $116,600 for the year. At
December 31, the market price of Martinez Fashion was $13 per
share.
Situation 2
Marin, Inc. obtained significant influence over Seles
Corporation by buying 30% of Seles’s 31,000 outstanding
shares of common stock at a total cost of $8 per share on
January 1, 2017. On June 15, Seles declared and paid cash
dividends of $38,400. On December 31, Seles reported a net
income of $92,500 for the year.
Prepare all necessary journal entries in 2017 for both
situations.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Date
Account Titles and Explanation
Debit
Credit
Situation 1: Riverbed Cosmetics
Situation 2: Marin,
Inc

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Exercise 17-18
Swifty
Corporation has municipal bonds classified as a held-to-
maturity at December 31, 2017. These bonds have a par value of
$791,000, an amortized cost of $791,000, and a fair value of
$709,000. The company believes that impairment accounting is
now appropriate for these bonds.
Prepare the journal entry to recognize the impairment.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Account Titles and Explanation
Debit
Credit
(To record the impairment.)
SHOW LIST OF ACCOUNTS
LINK TO TEXT

16. What is the new cost basis of the municipal bonds?
New cost basis of the municipal bonds
$
Given that the maturity value of the bonds is $791,000, should
Swifty
Corporation amortize the difference between the carrying
amount and the maturity value over the life of the bonds?
SHOW LIST OF ACCOUNTS
LINK TO TEXT
At December 31, 2018, the fair value of the municipal bonds is
$749,000. Prepare the entry (if any) to record this information.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Account Titles and Explanation
Debit
Credit
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Exercise 17-27
On August 15, 2016, Windsor Co. invested idle cash by
purchasing a call option on Counting Crows Inc. common shares
for $792. The notional value of the call option is 880 shares,
and the option price is $88. The option expires on January 31,
2017. The following data are available with respect to the call
option.
Date
Market Price of Counting
Crows Shares
Time Value of Call
Option
September 30, 2016
$106 per share
$396
December 31, 2016
$101 per share
143
January 15, 2017
$103 per share
66
Prepare the journal entries for Windsor for the following dates.
(a)

18. Investment in call option on Counting Crows shares on August
15, 2016.
(b)
September 30, 2016—Windsor prepares financial statements.
(c)
December 31, 2016—Windsor prepares financial statements.
(d)
January 15, 2017—Windsor settles the call option on the
Counting Crows shares.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
No.
Date
Account Titles and Explanation
Debit
Credit
(a)
(b)
(To record the change in intrinsic value.)

19. (To record the time value change.)
(c)
(To record the change in intrinsic value.)
(To record the time value change.)
(d)
(To record the time value change.)

20. (To record settlement of call option.)
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