CHAPTER 13

Investments

Learning Objectives
1. Explain how to account for debt investments.

2. Explain how to account for equity investments.

3. Indicate how debt and equity investments are reported in financial statements.

*4. Describe the form and content of consolidated financial statements as well as how to prepare them.

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-1
 ANSWERS TO QUESTIONS

1. The reasons companies invest in securities are: (1) excess cash not needed for operations that
can be invested, (2) for additional earnings, and (3) strategic reasons.
LO1 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement

2. (a) The cost of an investment in bonds classified as held-for-collection consists of all expenditures
necessary to acquire the bonds, such as the market price of the bonds plus any brokerage fees.
(b) Interest is recorded as it is earned; that is, over the life of the investment in bonds.
LO1 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement

3. (a) Losses and gains on the sale of debt investments are computed by comparing the carrying
amount of the investment to the net proceeds from the sale.
(b) Gains and losses are reported in the income statement under other income and expense.
LO1 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement

4. Kolkata Ltd. is incorrect. The gain is the difference between the net proceeds, exclusive of interest,
and the cost of the bonds. The correct gain is Rs4,500, or [(Rs45,000 – Rs500) – Rs40,000].
LO1 BT: AN Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Measurement

5. The cost of an investment in shares includes all expenditures necessary to acquire the
investment.
LO2 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement

6. The entry is:

Financial Assets at FVTPL—Equity............................................................. 63,200
Cash..................................................................................................... 63,200
LO2 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Reporting

7. (a) Whenever the investor’s influence on the operating and financial affairs of the associate is
significant, the equity method should be used. The major factor in determining significant
influence is the percentage of ownership interest held by the investor in the investee. The
general guideline for use of the equity method is 20%–50% ownership interest. Companies are
required to use judgment, however, rather than blindly follow the 20%–50% guideline.
(b) Revenue is recognized by the investor as it is earned by the associate.
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting

8. Since Rijo SA uses the equity method, the income reported by Pippen Packing (€80,000) should be
multiplied by Rijo’s ownership interest (30%) and the result (€24,000) should be debited to Equity
Investments and credited to Revenue from Equity Investments. Also, of the total dividend
declared and paid by Pippen (€10,000) Rijo will receive 30% or €3,000. This amount should be
debited to Cash and credited to Equity Investments.
LO2 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Measurement

9. Significant influence over an associate may result from representation on the board of directors,
participation in policy-making processes, material intercompany transactions. One must also
consider whether the shares held by other shareholders is concentrated or dispersed. An
investment (direct or indirect) of 20%–50% of the voting shares of an associate constitutes
significant influence unless there exists evidence to the contrary.

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-2
LO2 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-3
Questions Chapter 13 (Continued)

10. Under the fair value method, an investment is originally recorded and reported at cost.
Dividends are recorded as revenue. In subsequent periods, it is adjusted to fair value and an
unrealized gain or loss is recognized and included in income (trading security) or as a separate
component of equity (non-trading security). Under the equity method, the investment is
originally recorded and reported at cost; subsequently, the investment account is adjusted
during each period for
the investor’s share of the earnings or losses of the associate. The investor’s share of the
associate’s earnings is recognized in the earnings of the investor. Dividends received from
the associate are reductions in the carrying amount of the investment.
LO2, 3 BT: C Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Reporting

11. Consolidated financial statements present the total assets and liabilities controlled by the parent
company and the total revenues and expenses of the subsidiary companies.

Consolidated financial statements are especially useful to the shareholders, board of directors, and
management of the parent company.
LO2 BT: K Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting

12. Companies classify debt investments into three categories

1. Held-for-collection securities are debt securities that are held within a business model whose
objective is to hold to collect contractual cash flows; and contractual cash flows are solely
principal and interest.
2. Held-for-collection and selling securities are debt securities that are held within a business model
whose objective is to hold to collect cash flows and sell; and contractual cash flows are solely
principal and interest.
3. Held-for-trading securities are bought and held primarily for sale in the near term to generate
income on short-term price differences.

Equity investments are classified either as trading or non-trading securities. Equity investments
have no maturity date and therefore are never classified as held-for-collection securities.

Equity investments can also be equity method investments if ownership is between 20% and
50%, or consolidated investments if ownership is 50% or more.
LO 3 BT: K Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Reporting

13. Tina should report as follows:

(1) Under current assets in the statement of financial position:
Financial assets at FVTPL—Equity............................................................ €70,000
(2) Under other income and expense in the income statement:
Loss on financial assets at FVTPL (€70,000 - €74,000)............................ € (4,000)
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

14. Tina should report as follows:

(1) Under investments in the statement of financial position:
Financial Assets at FVTOCI—Equity......................................................... €70,000
(2) Under equity in the statement of financial position:
Accumulated other comprehensive loss (€70,000 - €74,000).................... € (4,000)
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-4
Questions Chapter 13 (Continued)
15. The entry is:
Fair Value Adjustment—FVTOCI (₤205,000 - ₤195,000)............................ 10,000
Unrealized Gain or Loss on Financial Assets at
FVTOCI —Other Comprehensive Income........................................... 10,000
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

16. The entry is:

Fair Value Adjustment—FVTPL (₤205,000 - ₤195,000).............................. 10,000
Gain on Financial Assets at FVTPL..................................................... 10,000
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

17. Unrealized Gain or Loss on Financial Assets at FVTOCI—Other Comprehensive Income is closed
out to the account Accumulated Other Comprehensive Income. This account is report as an
addition to (or in the case of on accumulated loss, a deduction from) equity. The unrealized gain
or loss is not included in the computation of net income.
LO3 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting

18. Reporting Unrealized Gain or Loss on Financial Assets at FVTOCI—Other Comprehensive Income
in the equity section by closing it out to Accumulated Other Comprehensive Income serves two
important purposes: (1) it reduces the volatility of net income due to fluctuations in fair value,
and (2) it still informs the financial statement user of the gain or loss that would occur if the
securities were sold at fair value.
LO3 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting

19. No. The investment in Key Ltd. shares is a long-term investment because there is no intent to
convert the shares into cash within a year or the operating cycle, whichever is longer.
LO3 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting

*20. (a) The parent company’s investment in the subsidiary’s ordinary shares and the subsidiary’s
equity account balances are eliminated.
(b) The investment account represents an interest in the assets of the subsidiary. The
statement of financial position of the subsidiary lists all its assets and liabilities (the net
assets). Therefore, there would be a double counting of net assets. Similarly, there would
be a double counting in equity because all the ordinary shares of the subsidiary are owned
by the shareholders of the parent.
LO4 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting

*21. The remaining excess of HK$8,000,000 [HK$318,000,000 – (HK$290,000,000 +

HK$20,000,000)] should be allocated to goodwill and presented in the consolidated statement of
financial position as an intangible asset—Goodwill.
LO4 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-5
 SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 13.1

Jan. 1 Financial Assets at Amortized Cost................ 50,000

Cash............................................................ 50,000

July 1 Cash.................................................................... 1,600

Interest Revenue........................................ 1,600
LO1 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting

BRIEF EXERCISE 13.2

Aug. 1 Financial Assets at FVTPL—Equity................. 35,700

Cash............................................................ 35,700

Dec. 1 Fair Value Adjustment—FVTPL........................ 4,300

Gain on Financial Assets at FVTPL
(€40,000 − €35,700).................................... 4,300

1 Cash.................................................................... 40,000
Financial Assets at FVTPL—Equity......... 35,700
Fair Value Adjustment—FVTPL................ 4,300
LO2 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting

BRIEF EXERCISE 13.3

Dec. 31 Equity Investments (25% X €190,000).............. 47,500

Revenue from Equity Investments........... 47,500

31 Cash (25% X €40,000)........................................ 10,000

Equity Investments.................................... 10,000
LO2 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-6
BRIEF EXERCISE 13.4

Dec. 31 Loss on Financial Assets at FVTPL................. 3,000

Fair Value Adjustment—FVTPL
(₤59,000 – ₤62,000)................................. 3,000
LO3 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Reporting

BRIEF EXERCISE 13.5

Statement of Financial Position

Current assets
Financial assets at FVTPL—Equity................................. ₤62,000
Less: Fair value adjustment—FVTPL.............................. (3,000)
₤59,000

Income Statement
Other income and expenses
Loss on Financial Assets at FVTPL................................ ₤3,000
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

BRIEF EXERCISE 13.6

Dec.31 Unrealized Gain or Loss on Financial Assets

at FVTOCI—Other Comprehensive Income............. 6,000
Fair Value Adjustment—FVTOCI
(R$66,000 – R$72,000)................................. 6,000
LO3 BT: AP Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA FC: Reporting

BRIEF EXERCISE 13.7

Statement of Financial Position

Investments
Financial assets at FVTOCI—Equity..................................... R$72,000
Less: Fair value adjustment—FVTOCI.................................. (6,000)
R$66,000

Equity
Accumulated other comprehensive loss.............................. R$ 6,000
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-7
BRIEF EXERCISE 13.8

Investments
Financial assets at FVTOCI—Equity..................................... ₤115,000
Investment in shares of 20–50% owned company,
at Equity............................................................................... 270,000
Total investments............................................................ ₤385,000
LO3 BT: AP Difficulty: Easy TOT: 3 min. AACSB: Analytic AICPA FC: Reporting

*BRIEF EXERCISE 13.9

Eliminations
Paula Shannon Consolidated
Company Company Dr. Cr. Data
Investment in
Shannon
Ordinary Shares 190,000 190,000 0
Share Capital—Ord. 120,000 120,000 0
Retained Earnings 70,000 70,000 0

LO4 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting

*BRIEF EXERCISE 13.10

Eliminations
Paula Shannon Consolidated
Company Company Dr. Cr. Data
Investment in
Shannon
Ordinary Shares 200,000 200,000 0
Excess of Cost
Over Book Value of
Subsidiary 10,000 10,000
Share Capital—Ord. 120,000 120,000 0
Retained Earnings 70,000 70,000 0

LO4 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-8
 SOLUTIONS FOR DO IT! EXERCISES

DO IT! 13.1

2025
Jan. 1 Financial Assets at Amortized Cost........ 50,000
Cash...................................................... 50,000

Dec. 31 Interest Receivable (£50,000 × 8%).......... 4,000

Interest Revenue.................................. 4,000

2026
Jan. 1 Cash........................................................... 4,000
Interest Receivable.............................. 4,000

Cash........................................................... 28,700
Loss on Sale of Financial Assets at
Amortized Cost ......................................... 1,300
Financial Assets at Amortized Cost
(£50,000 × 30/50).................................. 30,000

Dec. 31 Interest Receivable.................................... 1,600

Interest Revenue
[(£50,000 - ₤30,000) × 8%]................. 1,600
LO1 BT: AP Difficulty: Medium TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-9
DO IT! 13.2a

Trading securities:
Loss on Financial Assets at FVTPL.................................. 13,300*
Fair Value Adjustment—FVTPL.................................. 13,300

*¥11,100 + ¥2,200

Non-trading securities:
Fair Value Adjustment—FVTOCI........................................ 11,850**
Unrealized Gain or Loss on Financial Assets at
FVTOCI—Other Comprehensive Income.................... 11,850

**¥7,750 + ¥4,100
LO3 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting

DO IT! 13.2b

(1) June 17 Financial Assets at FVTPL—Equity

[(500,000 × 10%) × €11].......................... 550,000
Cash...................................................... 550,000

Sept. 3 Cash............................................................ 16,000

Dividend Revenue (€160,000 × 10%). . 16,000

(2) Jan. 1 Equity Investments

[(100,000 × 30% × €18]......................... 540,000
Cash...................................................... 540,000

May 15 Cash............................................................ 45,000

Equity Investments (€150,000 × 30%). 45,000

Dec. 31 Equity Investments (€270,000 × 30%)...... 81,000

Revenue from Equity Investments...... 81,000

LO2 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-10
DO IT! 13.3

Item Financial statement Category

1. Loss on sale of financial Income statement Non-operating
assets at FVTOCI—Debt. income and
expenses
2. Unrealized gain on Statement of
Equity
financial assets at FVTOCI. financial position
3. Fair value adjustment— Statement of
Current assets
FVTPL. financial position
4. Interest earned on Income statement Non-operating
investments in bonds. income and
expenses
5. Loss on financial assets at Income statement Non-operating
FVTPL. income and
expenses

LO3 BT: K Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-11
 SOLUTIONS TO EXERCISES

EXERCISE 13-1

1. Companies purchase investments in debt or equity securities because

they have excess cash, to generate earnings from investment income, or
for strategic reasons.

2. A corporation would have excess cash that it does not need for operations
due to seasonal fluctuations in sales and as a result of economic cycles.

3. The typical investment when investing cash for short periods of time
is low-risk, high liquidity, short-term securities such as government-issued
securities.

4. The typical investments when investing cash to generate earnings are

debt securities and equity securities.

5. A company would invest in securities that provide no current cash flows

for speculative reasons. They are speculating that the investment will
increase in value.

6. The typical equity investment when investing cash for strategic

reasons is shares of companies in a related industry or in an unrelated
industry that the company wishes to enter.
LO1 BT: K Difficulty: Easy TOT: 10 min. AACSB: None AICPA FC: Measurement

EXERCISE 13-2

(a) 2025
Jan. 1 Financial Assets at Amortized Cost........ 50,000
Cash.................................................... 50,000

Dec. 31 Interest Receivable (₤50,000 × 8%).......... 4,000

Interest Revenue.................................. 4,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-12
EXERCISE 13-2 (Continued)

2026
Jan. 1 Cash........................................................... 4,000
Interest Receivable............................ 4,000

1 Cash........................................................... 33,500
Financial Assets at Amortized Cost
(₤50,000 X 3/5)................................ 30,000
Gain on Sales of Financial Assets at
Amortized Cost(₤33,500 – ₤30,000).. 3,500

2026
(b) Dec. 31 Interest Receivable.................................... 1,600
Interest Revenue (₤20,000 X 8%)...... 1,600
LO1 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting

EXERCISE 13-3

January 1, 2025
Financial Assets at FVTOCI—Debt................................... 70,000
Cash............................................................................. 70,000

December 31, 2025

Interest Receivable (€70,000 X 9%)................................... 6,300
Interest Revenue......................................................... 6,300

December 31, 2025

Fair Value Adjustment—FVTOCI....................................... 525
Unrealized Gain or Loss on Financial Assets at
FVTOCI—Other Comprehensive Income
(€70,525 − €70,000)................................................... 525

December 31, 2025

Unrealized Gain or Loss on Financial Assets at
FVTOCI—Other Comprehensive Income.......................... 525
Accumulated Other Comprehensive Income........... 525

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-13
EXERCISE 13-3 (Continued)

January 1, 2026
Cash..................................................................................... 6,300
Interest Receivable..................................................... 6,300

January 1, 2026
Cash..................................................................................... 40,3006
Financial Assets at FVTOCI—Debt
(40/70 X €70,000)...................................................... 40,000
Fair Value Adjustment—FVTOCI (40/70 X €525)...... 300

Unrealized Gain or Loss on Financial Assets at

FVTOCI—Other Comprehensive Income.......................... 300
Gain on Sale of Financial Assets at FVTOCI—Debt
(40/70 X €525)............................................................ 300
LO1 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting

EXERCISE 13-4

(a) Feb. 1 Financial Assets at FVTPL—Equity........ 6,200

Cash................................................... 6,200

July 1 Cash (600 X ₤1)......................................... 600

Dividend Revenue............................. 600

Sept. 1 Fair Value Adjustment —FVTPL.............. 1,200

Gain on Financial Assets at FVTPL
(₤4,300 – ₤3,100)............................ 1,200

1 Cash........................................................... 4,300
Financial Assets at FVTPL—Equity
(₤6,200 X 3/6).................................. 3,100
Fair Value Adjustment—FVTPL....... 1,200

Dec. 1 Cash (300 X ₤1)......................................... 300

Dividend Revenue............................. 300

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-14
EXERCISE 13-4 (Continued)
(b) Dividend revenue and the gain on financial assets at FVTPL─
equity are reported under other income and expenses in the income
statement.
LO2 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

EXERCISE 13-5

Jan. 1 Financial Assets at FVTPL—Equity................ 142,100

Cash........................................................... 142,100

July 1 Cash (2,500 X €2.80)......................................... 7,000

Dividend Revenue..................................... 7,000

Dec. 1 Fair Value Adjustment—FVTPL....................... 2,780

Gain on Financial Assets at FVTPL
(€31,200 – €28,420)................................ 2,780

1 Cash................................................................... 31,200
Financial Assets at FVTPL—Equity
(€142,100 X 1/5)...................................... 28,420
Fair Value Adjustment—FVTPL............... 2,780

Dec. 31 Cash (2,000 X €2.90)......................................... 5,800

Dividend Revenue..................................... 5,800

31 Fair Value Adjustment—FVTPL....................... 9,320

Gain on Financial Assets at FVTPL
(€123,000 – €113,680)............................ 9,320
LO2 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

EXERCISE 13-6

February 1
Financial Assets at FVTPL—Equity.................................. 15,400
Cash (500 X €30.80).................................................... 15,400

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-15
EXERCISE 13-6 (Continued)

March 20
Loss on Financial Assets at FVTPL.................................. 230
Fair Value Adjustment—FVTPL (€2,850 – €3,080) 230

Cash..................................................................................... 2,850
Fair Value Adjustment—FVTPL......................................... 230
Financial Assets at FVTPL—Equity
(€15,400 X 100/500).................................................. 3,080

April 25
Cash (400 X €1.00).............................................................. 400
Dividend Revenue....................................................... 400
June 15
Fair Value Adjustment—FVTPL......................................... 1,150
Gain on Financial Assets at FVTPL
(€7,310 – €6,160).................................................. 1,150

Cash..................................................................................... 7,310
Financial Assets at FVTPL—Equity
(€15,400 X 200/500).................................................. 6,160
Fair Value Adjustment—FVTPL................................. 1,150

July 28
Cash (200 X €1.25).............................................................. 250
Dividend Revenue....................................................... 250
LO2 BT: AP Difficulty: Easy TOT: 10 min. AACSB: Analytic AICPA FC: Reporting

EXERCISE 13-7

(a) Jan. 1 Equity Investments.................................... 180,000

Cash.................................................... 180,000

Dec. 31 Cash (₤36,000 X 25%)................................ 9,000

Equity Investments............................ 9,000

31 Equity Investments.................................... 40,000

Revenue from Equity Investments
(₤160,000 X 25%).............................. 40,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-16
EXERCISE 13-7 (Continued)
(b) Investment in Morelli, January 1.......................................... ₤180,000
Less: Dividend received...................................................... 9,000
Plus: Share of reported income.......................................... 40,000
Investment in Morelli, December 31.................................... ₤211,000
LO2 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

EXERCISE 13-8

1. 2025
Mar. 18 Financial Assets at FVTOCI—Equity...... 390,000
Cash (200,000 X 15% X €13)............ 390,000

June 30 Cash.......................................................... 9,000

Dividend Revenue
(€60,000 X 15%)............................. 9,000

Dec. 31 Fair Value Adjustment—FVTOCI............ 60,000

Unrealized Gain or Loss on
Financial Assets at FVTOCI—Other
Comprehensive Income
(€450,000 – €390,000)..................... 60,000

Dec. 31 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other Comprehensive
Income...................................................... 60,000
Accumulated Other Comprehensive
Income............................................... 60,000

2. Jan. 1 Equity Investments.................................. 81,000

Cash (30,000 X 30% X €9)................ 81,000

June 15 Cash.......................................................... 9,000

Equity Investments
(€30,000 X 30%)............................. 9,000

Dec. 31 Equity Investments.................................. 24,000

Revenue from Equity Investments
(€80,000 X 30%)............................. 24,000
LO2, 3 BT: AP Difficulty: Easy TOT: 10 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-17
EXERCISE 13-9

(a) Since Edna owns more than 50% of the ordinary shares of Damen
Limited, Edna is called the parent company. Damen is the subsidiary
(affiliated) company. Because of its share ownership, Edna has a
controlling interest in Damen.

(b) When a company owns more than 50% of the ordinary shares of
another company, consolidated financial statements are usually
prepared. Consolidated financial statements present the total assets
and liabilities controlled by the parent company. They also present
the total revenues and expenses of the affiliated companies.

(c) Consolidated financial statements are useful because they indicate

the magnitude and scope of operations of the companies under
common control.
LO2 BT: K Difficulty: Easy TOT: 8 min. AACSB: None AICPA FC: Measurement, Reporting

EXERCISE 13-10

(a) Dec. 31 Loss on Financial Assets at FVTPL

(CHF53,000 – CHF49,000)........................... 4,000
Fair Value Adjustment—FVTPL............. 4,000

(b) Statement of Financial Position

Current assets
Financial assets at FVTPL—Equity......................... CHF53,000
Less: Fair value adjustment—FVTPL...................... (4,000)
CHF49,000

Income Statement
Other income and expenses
Loss on Financial Assets at FVTPL......................... CHF4,000
LO3 BT: AP Difficulty: Easy TOT: 5 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-18
EXERCISE 13-11

(a) Dec. 31 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other Comprehensive
Income (CHF53,000 – CHF49,000)................ 4,000
Fair Value Adjustment—FVTOCI........... 4,000

(b) Statement of Financial Position

Investments
Financial assets at FVTOCI—Equity.............................. CHF53,000
Less: Fair value adjustment—FVTOCI.......................... (4,000)
CHF49,000

Equity
Accumulated Other Comprehensive Loss.............. CHF 4,000

(c) Dear Ms. Devonshire:

Investments which are classified as trading (held for sale in the near
term) are reported at fair value in the statement of financial position,
with unrealized gains or losses reported in net income. Equity
investments which are classified as non-trading (held longer than
trading) are also reported at fair value, but unrealized gains or losses are
reported in the equity section.

Fair value is used as a reporting basis because it represents the cash

realizable value of the securities. Unrealized gains or losses on trading
investments are reported in the income statement because of the
likelihood that the securities will be sold at fair value in the near term.
Unrealized gains or losses on non-trading securities are reported in
equity rather than in income because there is a significant chance that
future changes in fair value will reverse unrealized gains or losses. So as
to not distort income with these fluctuations, they are reported directly
in equity.

I hope that the preceding discussion clears up any misunderstandings.

Please contact me if you have any questions.

Sincerely,

Student
Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-19
LO3 BT: AP Difficulty: Easy TOT: 10 min. AACSB: Analytic AICPA FC: Measurement, Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-20
EXERCISE 13-12

(a) Fair Value Adjustment—FVTPL......................................... 4,000

Gain on Financial Assets at FVTPL
(€124,000 – €120,000).............................................. 4,000

Unrealized Gain or Loss on Financial Assets at FVTOCI

—Other Comprehensive Income....................................... 6,000
Fair Value Adjustment—FVTOCI
(€94,000 – €100,000)................................................ 6,000

(b) Statement of Financial Position

Current assets
Financial assets at FVTPL—Equity........................... €120,000
Add: Fair value adjustment—FVTPL......................... 4,000
€124,000
Investments
Financial assets at FVTOCI—Equity......................... €100,000
Less: Fair value adjustment—FVTOCI...................... (6,000)
€ 94,000
Equity
Accumulated Other Comprehensive Loss ............... € 6,000

Income Statement
Other income and expenses
Gain on Financial Assets at FVTPL........................... € 4,000

LO3 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-21
*EXERCISE 13-13

LENNON ENTERPRISES AND SUBSIDIARY

Worksheet—Consolidated Statement of Financial Position
January 1, 2025
Lennon Ono Eliminations Consolidated
Assets Enterprises Ltd. Dr. Cr. Data
Plant and equipment
(net) 300,000 220,000 520,000
Investment in Ono
Ltd. ordinary
shares 220,000 220,000 0
Current assets 60,000 50,000 110,000
Totals 580,000 270,000 630,000

Equity and liabilities

Share capital—
Lennon Ent. 230,000 230,000
Share capital—
Ono Ltd. 80,000 80,000 0
Retained earnings—
Lennon Ent. 170,000 170,000
Retained earnings—
Ono Ltd. 140,000 140,000 0
Current liabilities 180,000 50,000 230,000
Totals 580,000 270,000 220,000 220,000 630,000

LO4 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-22
*EXERCISE 13-14

LENNON ENTERPRISES AND SUBSIDIARY

Worksheet—Consolidated Statement of Financial Position
January 1, 2025
Lennon Ono Eliminations Consolidated
Assets Enterprises Ltd. Dr. Cr. Data
Plant and equipment
(net) 300,000 220,000 520,000
Investment in Ono
Ltd.
ordinary shares 225,000 225,000 0
Current assets 55,000 50,000 105,000
Excess of cost over
book value 5,000 5,000
Totals 580,000 270,000 630,000

Equity and liabilities

Share capital—
Lennon Ent. 230,000 230,000
Share capital—
Ono Ltd. 80,000 80,000 0
Retained earnings—
Lennon Ent. 170,000 170,000
Retained earnings—
Ono Ltd. 140,000 140,000 0
Current liabilities 180,000 50,000 230,000
Totals 580,000 270,000 225,000 225,000 630,000

LO4 BT: AP Difficulty: Easy TOT: 8 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-23
 SOLUTIONS TO PROBLEMS
.

PROBLEM 13-1

(a) 2025
Jan. 1 Financial Assets at Amortized Cost..... 2,000,000
Cash................................................ 2,000,000

Dec. 31 Interest Receivable

(HK$2,000,000 X .07).......................... 140,000
Interest Revenue............................ 140,000

2028
Jan. 1 Cash........................................................ 140,000
Interest Receivable........................ 140,000

1 Cash (HK$1,000,000 X 1.05).................. 1,050,000

Financial Assets at Amortized
Cost ................................................ 1,000,000
Gain on Sale of Financial Assets
at Amortized Cost.......................... 50,000

Dec. 31 Interest Receivable

(HK$1,000,000 X .07).......................... 70,000
Interest Revenue............................ 70,000

(b) Statement of Financial Position

Investments
Financial assets at amortized cost........................... HK$2,000,000

Current assets
Interest receivable...................................................... HK$ 140,000

LO1, 3 BT: AP Difficulty: Medium TOT: 30 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-24
 PROBLEM 13-2

(a) Feb. 1 Financial Assets at FVTPL—Equity......... 32,400

Cash.................................................... 32,400

Mar. 1 Financial Assets at FVTPL—Equity......... 20,400

Cash.................................................... 20,400

Apr. 1 Financial Assets at FVTPL—Debt............ 50,000

Cash.................................................... 50,000

July 1 Cash (€.60 X 600)....................................... 360

Dividend Revenue............................. 360

Aug 1 Fair Value Adjustment—FVTPL .............. 600

Gain on Financial Assets at FVTPL
(€11,400 − €32,400 X 200/600)....... 600

1 Cash (€57 X 200)........................................ 11,400

Financial Assets at FVTPL—Equity
(€32,400 X 200/600)........................ 10,800
Fair Value Adjustment—FVTPL........ 600

Sept. 1 Cash (€1 X 800).......................................... 800

Dividend Revenue............................. 800

Oct. 1 Cash (€50,000 X 7% X 1/2)........................ 1,750

Interest Revenue................................ 1,750

1 Loss on Financial Assets at FVTPL........ 1,000

Fair Value Adjustment—FVTPL
(€49,000 – €50,000)......................... 1,000

1 Cash........................................................... 49,000
Fair Value Adjustment—FVTPL............... 1,000
Financial Assets at FVTPL—Debt.... 50,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-25
PROBLEM 13-2 (Continued)

Financial Assets at FVTPL—Equity Financial Assets at FVTPL—Debt

Feb. 1 32,400 Aug. 1 10,800 Apr. 1 50,000 Oct. 1 50,000
Mar. 1 20,400
Dec. 31 Bal. 42,000 Dec. 31 Bal. 0

(b) Dec. 31 Loss on Financial Assets at FVTPL.......... 800

Fair Value Adjustment—FVTPL
(€41,200 – €42,000).......................... 800

Security Cost Fair Value

Superior ordinary
shares €21,600* €22,000 (400 X €55)
Pawlik ordinary
shares 20,400 19,200 (800 X €24)
€42,000 €41,200
*(€32,400 - €10,800)

(c) Current assets

Financial assets at FVTPL—Equity................................... €42,000
Less: Fair value adjustment—FVTPL............................... (800)
€41,200

(d) Income Statement Account Category

Dividend Revenue Other income and expenses
Gain on Financial Assets at Other income and expenses
FVTPL
Interest Revenue Other income and expenses
Loss on Financial Assets at Other income and expenses
FVTPL

LO2, 3 BT: AP Difficulty: Medium TOT: 40 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-26
 PROBLEM 13-3

(a) 2025

Aug. 1 Cash (2,000 X ₤0.70).................................. 1,400

Dividend Revenue............................. 1,400

Sept 1 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other Comprehensive
Income.................................................... 2,000
Fair Value Adjustment—FVTOCI
(₤16,000 – ₤18,000)........................ 2,000

1 Cash (2,000 X ₤8)....................................... 16,000

Fair Value Adjustment—FVTOCI.............. 2,000
Financial Assets at FVTOCI—Equity 18,000

1 Accumulated Other Comprehensive

Income...................................................... 2,000
Unrealized Gain or Loss on Financial
Assets at FVTOCI— Other
Comprehensive Income.................... 2,000

1 Retained Earnings ................................... 2,000

Accumulated Other Comprehensive
Income................................................ 2,000

Oct. 1 Fair Value Adjustment—FVTOCI.............. 2,400

Unrealized Gain or Loss on Financial
Assets at FVTOCI—Other
Comprehensive Income
(₤26,400 – ₤24,000)......................... 2,400

1 Cash (800 X ₤33)........................................ 26,400

Financial Assets at FVTOCI—Equity 24,000
Fair Value Adjustment —FVTOCI..... 2,400

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-27
PROBLEM 13.3 (Continued)

1 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other Comprehensive
Income........................................................ 2,400
Accumulated Other Comprehensive
Income................................................ 2,400

1 Accumulated Other Comprehensive

Income........................................................ 2,400
Retained Earnings ............................ 2,400

Nov. 1 Cash (1,500 X ₤1)....................................... 1,500

Dividend Revenue............................. 1,500

Dec. 15 Cash (1,200 X ₤0.70).................................. 840

Dividend Revenue............................. 840

31 Cash (3,000 X ₤1)....................................... 3,000

Dividend Revenue............................. 3,000

Financial Assets at FVTOCI—Equity

2025 2025
Jan. 1 Balance 135,000* Sept. 1 18,000
Oct. 1 24,000
2022
Dec. 31 Balance 93,000

*(₤60,000 + ₤45,000 + ₤30,000)

(b) Dec. 31 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other Comprehensive
Income............................................................ 3,600
Fair Value Adjustment—FVTOCI
(₤89,400 – ₤93,000)............................. 3,600

Dec. 31 Accumulated Other Comprehensive Income 3,600

Unrealized Gain or Loss on Financial
Assets at FVTOCI—Other
Comprehensive Income ........................ 3,600

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-28
PROBLEM 13-3 (Continued)

2025 2025
Security Cost Fair Value
Carlene Co. ₤36,000 ₤38,400 (1,200 × £32)
Riverdale Co. 27,000 24,000 (3,000 × £ 8)
Raczynski Co. 30,000 27,000 (1,500 × £18)
₤93,000 ₤89,400

(c) Investments
Financial assets at FVTOCI—Equity. ......................... ₤93,000
Less: Fair value adjustment—FVTOCI....................... (3,600)
₤89,400
Equity
Share capital—ordinary................. ₤1,500,000
Retained earnings......................... 1,000,000
Accumulated other comprehensive loss (3,600)
Total equity..................................... ₤2,496,400

Accumulated Other Comprehensive Income

2025 2025
Jan. 1 Balance 0
Sept. 1 2,000 Sept. 1 2,000
Oct. 1 2,400 Oct. 1 2,400
Dec. 31 3,600
2025
Dec. 31 Balance 3,600

LO2, 3 BT: AP Difficulty: Medium TOT: 40 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-29
 PROBLEM 13-4

(a) Jan. 1 Financial Assets at FVTPL—Equity..... 800,000

Cash................................................ 800,000

Mar. 15 Cash........................................................ 13,500

Dividend Revenue
(45,000 X ₤0.30).......................... 13,500

June 15 Cash........................................................ 13,500

Dividend Revenue.......................... 13,500

Sept. 15 Cash........................................................ 13,500

Dividend Revenue.......................... 13,500

Dec. 15 Cash........................................................ 13,500

Dividend Revenue.......................... 13,500

31 Fair Value Adjustment—FVTPL............ 280,000

Gain on Financial Assets at FVTPL
[(₤24 X 45,000) – ₤800,000]......... 280,000

(b) Jan. 1 Equity Investments............................... 800,000

Cash................................................ 800,000

Mar. 15 Cash........................................................ 13,500

Equity Investments........................ 13,500

June 15 Cash........................................................ 13,500

Equity Investments........................ 13,500

Sept. 15 Cash........................................................ 13,500

Equity Investments........................ 13,500

Dec. 15 Cash........................................................ 13,500

Equity Investments........................ 13,500

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-30
PROBLEM 13-4 (Continued)

Dec. 31 Equity Investments............................... 96,000

Revenue from Equity Investments
(₤320,000 X 30%)........................ 96,000

(c) Fair Value Equity

Method Method

Equity Investments ₤1,080,000* ₤842,000**

Gain on Financial Assets at FVTPL 280,000
Dividend Revenue 54,000 0
Revenue from Equity Investments 0 96,000

*₤24 X 45,000 shares

**₤800,000 + ₤96,000 – ₤54,000
LO2, 3 BT: AP Difficulty: Medium TOT: 30 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-31
 PROBLEM 13-5

(a) Jan. 20 Fair Value Adjustment—FVTOCI ............. 2,800

Unrealized Gain or Loss on Financial
Assets at FVTOCI—Other
Comprehensive Income
(R$54,800 − R$52,000)................... 2,800

20 Cash........................................................... 54,800
Financial Assets at FVTOCI—Equity 52,000
Fair Value Adjustment—FVTOCI...... 2,800

20 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other Comprehensive
Income........................................................ 2,800
Accumulated Other Comprehensive
Income................................................ 2.800

20 Accumulated Other Comprehensive Income 2,800

Retained Earnings............................. 2,800

28 Financial Assets at FVTOCI—Equity....... 31,680

Cash (400 X R$79.20)........................ 31,680

30 Cash........................................................... 1,470
Dividend Revenue (R$1.05 X 1,400). 1,470

Feb. 8 Cash........................................................... 480

Dividend Revenue (R$0.40 X 1,200). 480

18 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other
Comprehensive Income............................ 2,040
Fair Value Adjustment—FVTOCI
(R$31,560 − R$33,600)................... 2,040

18 Cash (R$26.30 X 1,200)............................. 31,560

Fair Value Adjustment—FVTOCI............. 2,040
Financial Assets at FVTOCI—Equity 33,600

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-32
 PROBLEM 13-5 (Continued)

18 Accumulated Other Comprehensive Income 2,040

Unrealized Gain or Loss on Financial
Assets at FVTOCI—Other
Comprehensive Income.................... 2,040

18 Retained Earnings..................................... 2,040

Accumulated Other Comprehensive Income 2,040

July 30 Cash........................................................... 1,400

Dividend Revenue (R$1.00 X 1,400). 1,400

Sept. 6 Financial Assets at FVTOCI—Equity....... 49,200

Cash (R$82 X 600)............................. 49,200

Dec. 1 Cash........................................................... 1,350

Dividend Revenue (R$1.35 X 1,000). 1,350

(b) Financial Assets at FVTOCI—Equity

1/1 Bal. 169,600 1/20 52,000
1/28 31,680 2/18 33,600
9/6 49,200
12/31 Bal. 164,880

(c) Dec. 31 Unrealized Gain or Loss on Financial

Assets at FVTOCI—Other
Comprehensive Income................................ 3,280
Fair Value Adjustment—FVTOCI
(R$161,600 – R$164,880).................... 3,280

Accumulated Other Comprehensive Income 3,280

Unrealized Gain or Loss on Financial
Assets at FVTOCI—Other
Comprehensive Income......................... 3,280

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-33
 PROBLEM 13-5 (Continued)

Security Cost Fair Value

Elderberry A/S ordinary R$ 84,000 R$ 89,600 (1,400 X R$64)
Hachito ordinary 80,880* 72,000 (1,000 X R$72)
R$164,880 R$161,600

*[(600 × R$82) + (400 × R$79.20)]

(d) Investments
Financial assets at FVTOCI—Equity............................ R$164,880
Less: Fair value adjustment—FVTOCI......................... (3,280)
R$161,600

Equity
Total share capital and retained earnings................... xxxxx
Accumulated other comprehensive loss..................... 3,280
Total equity............................................................. R$ xxxxx

LO2, 3 BT: AP Difficulty: Medium TOT: 45 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-34
 PROBLEM 13-6

RADAR INDUSTRIES LTD.

Statement of Financial Position
December 31, 2025

Assets
Intangible assets
Goodwill........................................................... €200,000

Property, plant, and equipment

Land.................................................... €390,000
Buildings............................................. €950,000
Less: Accumulated depr.—
buildings.......................................... 180,000 770,000
Equipment.......................................... 275,000
Less: Accumulated depr.—
Equipment....................................... 52,000 223,000 1,383,000

Investments
Financial assets at FVTOCI—Equity 278,000
Add: Fair value adjustment—FVTOCI 8,000 286,000
Investment in shares of 20%–50%
owned company, at equity.......................... 380,000 666,000

Current assets
Prepaid Insurance.............................. 16,000
Inventory............................................. 170,000
Accounts receivable.......................... 140,000
Less: Loss allowance...................... 6,000 134,000
Financial assets at fair value through
profit or loss .............................. 180,000
Cash.................................................... 42,000 542,000
Total assets................................................ €2,791,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-35
PROBLEM 13-6 (Continued)

RADAR INDUSTRIES LTD.

Statement of Financial Position (Continued)
December 31, 2025

Equity and Liabilities

Equity
Share capital—ordinary, €10 par value,
500,000 shares authorized
150,000 shares issued and
outstanding.................................€1,500,000
Share premium—ordinary................. 130,000 €1,630,000
Retained earnings……………………. 103,000
Accumulated other comprehensive
income......................................... 8,000 €1,741,000

Non-current liabilities
Bonds payable, 10%, due 2028 540,000

Current liabilities
Notes payable..................................... 70,000
Accounts payable.............................. 240,000
Income taxes payable........................ 120,000
Dividends payable.............................. 80,000 510,000
Total equity and liabilities......................... €2,791,000
LO3 BT: AP Difficulty: Medium TOT: 40 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-36
 *PROBLEM 13-7

(a) 2025
Dec. 31 Equity Investments 1,218,000
Current Assets 1,218,000

(b) LIU LIMITED AND SUBSIDIARY

Worksheet—Consolidated Statement of Financial Position
December 31, 2025
Yang Eliminations Consolidated
Assets Liu Limited Plastics Dr. Cr. Data
Plant and equipment
(net) 2,100,000 676,000 84,000 2,860,000
Investment in
Yang Plastics
ordinary shares 1,218,000 1,218,000 0
Current assets 262,000 435,500 697,500
Excess of cost over
book value of
subsidiary 115,000 115,000
Totals 3,580,000 1,111,500 3,672,500

Equity and liabilities

Share capital—Liu
Limited 1,950,000 1,950,000
Share capital—Yang
Plastics 525,000 525,000 0
Retained earnings—
Liu Limited 1,052,000 1,052,000
Retained earnings—
Yang Plastics 494,000 494,000 0
Current liabilities 578,000 92,500 670,500
Totals 3,580,000 1,111,500 1,218,000 1,218,000 3,672,500

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-37
*PROBLEM 13-7 (Continued)
(c) LIU LIMITED AND SUBSIDIARY
Consolidated Statement of Financial Position
December 31, 2025
Assets
Goodwill (¥199,000 − ¥84,000).......................... ¥ 115,000
Plant and equipment, net
(¥2,776,000 + ¥84,000) 2,860,000
Current assets................................................... 697,500
Total assets................................................ ¥3,672,500

Equity and Liabilities

Equity.................................................................
Share capital—ordinary............................ ¥1,950,000
Retained earnings..................................... 1,052,000 ¥3,002,000
Current liabilities............................................... 670,500
Total equity and liabilities.................... ¥3,672,500

LO4 BT: AP Difficulty: Medium TOT: 40 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-38
 COMPREHENSIVE ACCOUNTING CYCLE REVIEW

Part I

(a) From: Student’s email address

To: Mindy Feldamp email address

Cc: Oscar Lopez email address
Bcc: Lori Melton email address

Date: 5/26/2024

Subject: Analysis of Partnership vs. Corporate Form of

Business
Organization

I have examined your situation regarding the establishment of your

business. Before discussing my recommendations, I would like to
briefly review the advantages and disadvantages of partnerships and
corporations.

The primary advantages of a partnership over a corporation are:

1. Partnerships are more easily formed than corporations. Partnerships

can be formed simply by the voluntary agreement of two or more
individuals. Forming a corporation requires preparing and filing
documents with governmental agencies, paying incorporation
fees, etc.

2. Income from a partnership is subject to less tax than income from

a corporation. Even though partnerships are required to file
information tax returns (returns that show financial information, but
do not require any payment of taxes), they are not considered
taxable entities. A partner’s share of partnership income is
taxed only on the partner’s personal income tax return.
Corporations are taxable entities and pay taxes on corporate
income. In addition, any dividends distributed by corporations to
individuals are subject to personal income tax on the personal
income tax return. This is known as double taxation.

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-39
 3. Partnerships have more flexibility in decision making. The decision-
making process used in a partnership is determined by the partners,
whereas some decisions required in corporations must follow formal
procedures described in the bylaws of the corporation.

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-40
ACR13 (Continued)

The primary advantages of a corporation over a partnership are:

1. Mutual agency does not exist in a corporation. This means that the owners
of a corporation (shareholders) do not have the power to bind the
corporation beyond their authority. For example, a shareholder who is
not employed by the firm cannot enter into contracts or other agreements
on behalf of the corporation. Owners of a partnership (partners) are
bound by the actions of their partners, even when partners act beyond
the scope of their authority. This is true as long as the actions seem
appropriate for the business.

2. The owners of a corporation have limited liability. When the

corporation’s assets are not sufficient to pay creditors’ claims, the personal
assets of the shareholders are protected from the corporation’s creditors. In
a partnership, once the assets of the partnership have been used to pay
creditors’ claims, the personal assets of the partners can be taken to
satisfy the creditors’ demands. A special type of partnership, a limited
partnership, protects the personal assets of limited partners, but at least
one partner’s assets are still at risk. This partner is called a general
partner.

3. The life of a corporation is unlimited. When ownership changes occur (e.g.,

shareholders buy or sell shares), the corporation continues to exist as a
legal entity. When ownership changes occur in a partnership (e.g.,
existing partner leaves, new partner is added), the old partnership no
longer exists as a legal entity. A new partnership can be formed and the
business can continue, but the original partnership must be dissolved.

After examining your situation, I believe that you would be wise to choose
the corporate form of business organization. There are two reasons for this
recommendation. The first reason is that the venture you are about to
undertake will require significant capital and, generally, capital is more easily
raised via a corporation than a partnership. The other reason is that you will be
protected from unlimited liability if you incorporate as opposed to forming a
partnership. Given the potential risk of starting a venture of this kind, I believe
it is in your best interest to protect your personal assets by using the corporate
form of organization.

I wish you the best in your new endeavor and please call upon me when you are
in need of further assistance.

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-41
Student’s name

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-42
ACR13 (Continued)

Part II

(b) Equity financing option:

Positives Negatives
No fixed interest payments Control of the corporation is lost
required Difficulty of finding an interested
investor
Earnings per share are lower

Debt financing option:

Positives Negatives
Control stays with three Interest payments quickly drain
incorporators cash
No need for additional investor
Earnings per share are higher

Shares outstanding before financing 60,000 shares

Equity Financing Debt Financing

Income before interest and taxes €300,000 €300,000
Interest expense — 126,000*
Income before taxes 300,000 174,000
Tax expense (32%) 96,000 55,680
Net income €204,000 €118,320
Shares outstanding after financing 200,000 60,000
Earnings per share € 1.02 € 1.97
*€1,400,000 × 9%

Part III

(c) 1. 6/12/24 Cash.............................................. 100,000

Buildings....................................... 200,000
Share Capital—Ordinary...... 120,000
Share Premium—Ordinary. . 180,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-43
ACR13 (Continued)

7/21/24 Cash............................................... 900,000

Share Capital—Ordinary....... 180,000
Share Premium—Ordinary. . . 720,000

7/27/25 Share Dividends

(150,000 X .10 X €3)................... 45,000
Ordinary Share Dividends
Distributable....................... 30,000
Share Premium—Ordinary. . . 15,000

7/31/25 No entry

8/15/25 Ordinary Share Dividends

Distributable............................... 30,000
Share Capital—Ordinary....... 30,000

12/4/25 Cash Dividends

(165,000 X €0.05)........................ 8,250
Dividends Payable................. 8,250

12/14/25 No entry

12/24/25 Dividends Payable......................... 8,250

Cash........................................ 8,250

2. Shares Issued and Outstanding

Total Shares
Number of Issued and
Date Event Shares Issued Outstanding
6/12/24 Issuance to Incorporators 60,000 60,000
7/21/24 Issuance to Marino 90,000 150,000
8/15/25 Share dividend issuance 15,000 165,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-44
ACR13 (Continued)

Part IV

(d) 1. 1/1/26 Cash.............................................. 548,000

Bonds Payable..................... 548,000

2. 12/31/26 Interest Expense.......................... 41,200

Bonds Payable
(€52,000 ÷ 10).................... 5,200
Interest Payable
(€600,000 X .06)............................ 36,000

3. 1/1/27 Interest Payable........................... 36,000

Cash...................................... 36,000

4. 12/31/27 Interest Expense.......................... 41,200

Bonds Payable
(€52,000 ÷ 10).................... 5,200
Interest Payable
(€600,000 X .06)................. 36,000

LO N/A BT: AP Difficulty: Hard TOT: 90 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-45
 CT13.1 FINANCIAL REPORTING PROBLEM

(a) TSMC made the following statement about what was included on its
consolidated financial statement:

Basis of Consolidation
The consolidated financial statements incorporate the financial statements
of TSMC and entities controlled by TSMC (its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of are included

in the consolidated statements of profit or loss and other comprehensive
income from the effective date of acquisition and up to the effective date of
disposal, as appropriate. Total comprehensive income of subsidiaries is
attributed to the shareholders of the parent and to the non-controlling
interests even if this results in the non-controlling interests having a deficit
balance.

When necessary, adjustments are made to the financial statements of

subsidiaries to bring their accounting policies into line with those used by
the Company.

All intra-group transactions, balances, income and expenses are eliminated

in full on consolidation.

Changes in the Company’s ownership interests in subsidiaries that do not

result in the Company losing control over the subsidiaries are accounted for
as equity transactions. The carrying amounts of the Company’s interests
and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognized directly in equity and attributed
to shareholders of the parent.

When the Company loses control of a subsidiary, a gain or loss is

recognized in profit or loss and is calculated as the difference between: a.
the aggregate of the fair value of consideration received and the fair value of
any retained interest at the date when control is lost; and b. the previous
carrying amount of the assets (including goodwill), and liabilities of the
subsidiary and any non-controlling interest.

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-46
CT13.1 (Continued)

The Company shall account for all amounts recognized in other

comprehensive income in relation to the subsidiary on the same basis as
would be required if the Company had directly disposed of the related
assets and liabilities.

The fair value of any investment retained in the former subsidiary at the date
when control is lost is regarded as the cost on initial recognition of an
investment in an associate.

(b) TSMC’s Consolidated Statement of Cash Flows shows that

NT$507,238.7 million for property and equipment during the year.

LO 2 BT: C Difficulty: Easy TOT: 15 min. AACSB: None AICPA FC: Reporting AICPA PC: Communication

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-47
 CT13.2 COMPARATIVE ANALYSIS PROBLEM

(a) Delfi Limited Nestlé

1. Cash provided (used) for investing (US$4,842) (CHF5,667)
activities thousand million
2. Cash used for capital expenditures
(spending) (3,706) (4,076)

(b) In Note 2 to the consolidated financial statements, Nestlé states that

the consolidated financial statements comprise those of Nestlé S.A.
and of its subsidiaries (the Group)., in Note 3, are;

– Zone Europe, Middle East and North Africa (EMENA)

– Zone Americas (AMS)
– Zone Asia, Oceania and sub-Sahara Africa (AOA)
– Other

LO 2 BT: AN Difficulty: Easy TOT: 15 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-48
 CT13.3 REAL-WORLD FOCUS

Answers will vary depending on company chosen. The following sample

solution is provided for Medtronic, Inc.

(a) 29 analysts rated this company.

(b) 7/29 or 24% of the analysts rated it a strong buy.
(c) Average rating 2.2 on a scale of 1.0 (strong buy) to 5.0 (strong sell).
(d) Average rating: No change.
(e) Earnings surprise: 1.39%

LO 2 BT: K Difficulty: Easy TOT: 10 min. AACSB: Knowledge AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-49
 CT13.4 DECISION-MAKING ACROSS THE ORGANIZATION

(a) and (b)

The dollar amount received upon the sale of the UMW Company shares was
₤1,468,000. Since Kemper Ltd. has a 30% interest in UMW, the equity method
should be used to report dividends and net income. A reconstruction of the
correct entries can be prepared for the acquisition, the equity method
treatment of dividends and revenue, and the sale. A plug figure for cash will
balance the entry for the sale. These entries are provided below.

Both the shareholder and the president are correct. Since the equity method
adjusts the investment account for the earnings of the associate, the “very
profitable” UMW investment balance has increased during the period the
shares were held. The shares were sold at less than their current investment
balance and thus a loss was recognized. Shareholder Kerwin is correct in
labeling this a very profitable company and in noting that a loss was
recognized on the sale.

President Chavez is correct in that the investment was sold at a higher

figure than the ₤1,300,000 purchase price. The key to the dilemma is to note that
the selling price was less than the carrying amount of the investment. The
carrying amount has increased due to the recognition of UMW income during
the time the shares were held.

Entries for the investment in UMW Company:

Acquisition
Equity Investments.................................................... 1,300,000
Cash.................................................................... 1,300,000

Previous Years—Equity Method

Equity Investments.................................................... 372,000
Revenue from Share Investments
(₤1,240,000 × 30%)............................ 372,000

Cash............................................................................ 132,000
Equity Investments (₤440,000 × 30%).............. 132,000

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-50
CT13.4 (Continued)

This Year—Equity Method

Equity Investments.................................................. 156,000
Revenue from Share Investments
(₤520,000 × 30%).................................. 156,000*

Cash.......................................................................... 48,000
Equity Investments (₤160,000 × 30%)............ 48,000*

Sale of the UMW Company Shares

Cash (Cash is a plug.)............................................. 1,468,000
Loss on Sale of Investments.................................. 180,000
Equity Investments.......................................... 1,648,000*

*₤1,300,000 + (₤372,000 + ₤156,000) – (₤132,000 + ₤48,000)

LO N/A BT: AP Difficulty: Easy TOT: 20 min. AACSB: Analytic AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-51
 CT13.5 COMMUNICATION ACTIVITY

Dear Mr. Scholes:

I am writing this memo to make suggestions regarding the appropriate

treatment for the two securities you are holding in your portfolio. Assuming that
your investment in Longley Industries does not represent a significant interest
in that firm, it should be accounted for as a non-trading security because it is a
share investment that you do not intend on selling in the near future. You will
not report any gains or losses on this investment in your income statement until
you sell it. Unrealized gains and losses on these investments will appear in
Other Comprehensive Income and as equity on the balance sheet. On the
other hand, your debt investment should be accounted for as a trading
security since you purchased it with the intent to generate a short-term profit.
Unrealized gains and losses at your statement of financial position date should
be reported in other income and expense on the income statement.

LO 2 BT: C Difficulty: Easy TOT: 10 min. AACSB: None AICPA FC: Reporting

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-52
 CT13.6 ETHICS CASE

(a) Classifying the securities as they propose will indeed have the effect on
net income that they say it will. Classifying all the gains as trading securities
will cause all the gains to flow through the income statement this year and
classifying the losses as non-trading securities will defer the losses from
this year’s income statement. Classifying the gains and losses just the
opposite will have the opposite effect.

(b) What each proposes is unethical since it is knowingly not in accordance

with IFRS. The financial statements are fraudulently, not fairly, stated. The
affected stakeholders are other members of the company’s officers and
directors, the independent auditors (who may detect these misstatements),
the shareholders, and prospective investors.

(c) The act of selling certain securities (those with gains or those with
losses) is management’s choice and is not per se unethical. Accounting
standards allow the sale of selected securities so long as the method of
assigning cost adopted by the company is consistently applied. If the
officers act in the best interest of the company and its stakeholders, and
in accordance with IFRS, and not in their self-interest, their behavior is
probably ethical. Knowingly engaging in unsound and poor business and
accounting practices that waste assets or that misstate financial statements
is unethical behavior.

LO 3 BT: E Difficulty: Easy TOT: 15 min. AACSB: Ethics AICPA FC: Reporting AICPA PC: Professional
Demeanor

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-53
 GAAP FINANCIAL REPORTING PROBLEM

GAAP 13.1

(a) Percentage increase from 2019 to 2020:

(1) Short-term marketable securities: ($52,927 – $51,713) 
$51,713 = 2.3%
(2) Long-term marketable securities: ($100,887 – $105,341) 
$105,341 = (4.2%)

(b)
(1) Purchases of marketable securities during the year: $114,938
million.
(2) Payments for business acquisitions, net of cash acquired:
$1,524 million.

LO 5 BT: AN Difficulty: Easy TOT: 12 min. AACSB: Analytic, Diversity AICPA FC: Reporting AICPA BB:
International/Global Perspective

Copyright © 2023 WILEY Weygandt, Financial Accounting, IFRS, 4/e, Solutions Manual (For Instructor Use Only) 13-