, SOLUTION MANUAL FOR Financial Accounting, 18e Warren
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, APPENDIX B
SELECTED TOPIC
TOPIC 1: INVESTMENTS
ASSIGNMENTS
B1–1
Held-to-maturity, trading, and available-for-sale securities
B1–2
The primary objective of investing in held-to-maturity securities is to earn
interest revenue and collect the face value of the security at its maturity date.
B1–3
Cost method
B1–4
Held-to-maturity securities that will mature within one year are reported as
current assets. Securities maturing beyond one year are reported as long-term
assets.
B1–5
a. Investments—Vasquez City Bonds 420,000
Interest Receivable 6,300
Cash 426,300
b. Cash ($420,000 × 6% × 1/2) 12,600
Interest Receivable 6,300
Interest Revenue 6,300
c. Cash 208,950 *
Loss on Sale of Investments 2,100
Interest Revenue 1,050
Investments—Vasquez City Bonds 210,000
* Sales proceeds ($210,000 × 99%)……………………………………
$207,900
Accrued interest………………………………………………………… 1,050
Total proceeds from sale……………………………………………… $208,950
d. Cash 210,000
Investments—Vasquez City Bonds 210,000
B1-1
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–6
a. Investments—Hotline Inc. Bonds 180,000
Interest Receivable 1,500
Cash 181,500
b. Cash ($180,000 × 5% × 1/2) 4,500
Interest Receivable 1,500
Interest Revenue 3,000
c. Cash 92,550 *
Interest Revenue 750
Gain on Sale of Investments 1,800
Investments—Hotline Inc. Bonds 90,000
* Sales proceeds ($90,000 × 102%)……………………………… $91,800
Accrued interest…………………………………………………… 750
Total proceeds from sale………………………………………… $92,550
d. Cash 90,000
Investments—Hotline Inc. Bonds 90,000
B1–7
a. May 1 Investments—Marimar Co. Bonds 150,000
Cash 150,000
b. Nov. 1 Cash 4,500
Interest Revenue 4,500
$150,000 × 6% × 6/12.
c. Nov. 1 Cash ($55,000 × 98%) 53,900
Loss on Sale of Investments 1,100
Investments—Marimar Co. Bonds 55,000
d. Dec. 31 Interest Receivable 950
Interest Revenue 950
Accrued interest [($150,000 –
$55,000) × 6% × 2/12].
B1-2
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–8
a. 20Y1
Oct. 1 Investments—Effenstein Corp. Bonds 240,000
Cash 240,000
b. 20Y1
Dec. 31 Interest Receivable 4,800
Interest Revenue 4,800
Accrued interest ($240,000 × 8%
× 3/12).
c. 20Y2
Apr. 1 Cash 9,600
Interest Receivable 4,800
Interest Revenue ($240,000 × 8% × 3/12) 4,800
d. 20Y2
Apr. 1 Cash ($90,000 × 102%) 91,800
Gain on Sale of Investments 1,800
Investments—Effenstein Corp. Bonds 90,000
e. 20Y8
Oct. 1 Cash 150,000
Investments—Effenstein Corp. Bonds 150,000
B1-3
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–9
a. Year 1
May 1 Investments—Lumpkin County Bonds 360,000
Interest Receivable 1,800 *
Cash 361,800
* $360,000 × 6% × 1/12
b. Oct. 1 Cash ($360,000 × 6% × 1/2) 10,800
Interest Receivable 1,800
Interest Revenue 9,000
c. Oct. 31 Cash 88,650 *
Loss on Sale of Investments 1,800
Interest Revenue 450
Investments—Lumpkin County Bonds 90,000
* Bond sale ($90,000 × 98%)…………………………… $88,200
Accrued interest ($90,000 × 6% × 1/12)…………… 450
Total proceeds………………………………………… $88,650
d. Dec. 31 Interest Receivable 2,700
Interest Revenue 2,700
($270,000 × 6% × 2/12).
e. Year 20
Apr. 1 Cash 270,000
Investments—Lumpkin County Bonds 270,000
B1-4
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–10
a. Jan. 31 Investments—Government Bonds 75,000
Interest Receivable 375 *
Cash 75,375
* $75,000 × 6% × 1/12
July 1 Cash ($75,000 × 6% × 1/2) 2,250
Interest Receivable 375
Interest Revenue 1,875
Aug. 30 Cash 34,650 *
Loss on Sale of Investments 700
Interest Revenue 350
Investments—Government Bonds 35,000
* Bond sale ($35,000 × 98%)………………………………… $34,300
Accrued interest ($35,000 × 6% × 2/12)…………………… 350
Total proceeds from sale…………………………………… $34,650
b. Dec. 31 Interest Receivable 1,200
Interest Revenue 1,200
Accrued interest ($40,000 ×
6% × 1/2).
c. July 1 Cash 40,000
Investments—Government Bonds 40,000
B1–11
The primary objective of investing in trading securities is to earn profits from
short-term changes in their market prices.
B1–12
Fair value method
B1–13
a. The trading securities would be reported as a current asset as follows:
Trading investments (at cost) $50,000
Valuation allowance for trading investments 11,500
Trading investments (at fair value) $61,500
b. The increase in value of the securities of $11,500 would be reported on the
income statement as an unrealized gain on trading investments as part of
“Other revenue.”
B1-5
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–14
20Y3
Dec. 31 Unrealized Loss on Trading Investments 37,000 *
Valuation Allowance for Trading Investments 37,000
To record decrease in fair value of
trading investments.
* Trading investments at fair value, December 31 ……………………………… $ 309,000
Less trading investments at cost………………………………………………… (346,000)
Unrealized loss on trading investments………………………………………… $ (37,000)
B1–15
20Y9
Dec. 31 Valuation Allowance for Trading Investments 6,500 *
Unrealized Gain on Trading Investments 6,500
To record increase in fair value of
trading investments.
* Trading investments at fair value, December 31 ……………………………… $ 79,100
Less trading investments at cost………………………………………………… (72,600)
Unrealized gain on trading investments………………………………………… $ 6,500
B1–16
a. 20Y7
Feb. 24 Trading Investments—Raiders Inc. 551,000
Cash 551,000
Dec. 31 Valuation Allowance for Trading Investments 58,000
Unrealized Gain on Trading Investments 58,000
To record increase in fair value of trading
investments ($609,000 – $551,000).
b. An unrealized gain or unrealized loss on trading investments is reported
on the income statement as part of “Other revenue (loss)” (or a separate item
if significant). Unrealized losses would be deducted in determining net income,
while unrealized gains would be added in determining net income.
B1-6
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–17
a. 20Y3
Dec. 31 Unrealized Loss on Trading Investments 1,950
Valuation Allowance for Trading
Investments 1,950
To record decrease in fair value of
trading investments
($115,550 – $117,500).
b. 20Y4
May 10 Trading Investments—Carroll Inc. 34,900
Cash 34,900
c. 20Y4
Dec. 31 Valuation Allowance for Trading Investments 24,550 *
Unrealized Gain on Trading Investments 24,550
To record the increase in fair value of
trading investments.
* The adjusted December 31, 20Y4, balance of Valuation Allowance for Trading Investments
should be a debit balance of $22,600, as follows:
Fair value of the portfolio of trading securities................................. $ 175,000
Cost of trading securities:
Griffin Inc. ....................................................................................... $40,000
Luck Company................................................................................. 37,500
Wilson Company............................................................................. 40,000
Carroll Inc. ...................................................................................... 34,900
Total cost ................................................................................... (152,400)
Valuation allowance on December 31, 20Y4...................................... $ 22,600
Since Valuation Allowance for Trading Investments has a January 1, 20Y4, credit balance of
$1,950, the adjustment must be $24,550, as follows:
Valuation Allowance for Trading Investments
20Y4 20Y4
Dec. 31 Adj. 24,550 Jan. 1 Bal. 1,950
Dec. 31 Adj. Bal. 22,600
d. $175,000; the fair value of the trading investments, which is the sum of the
trading investments account of $152,400 and the valuation account of $22,600.
B1–18
Fair value method
B1-7
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–19
The available-for-sale securities would be reported as a current asset on the balance
sheet with a cost of $37,500 less the valuation allowance for available-for-sale securities
of $3,600 for a net fair value of $33,900. The unrealized loss on available-for-sale
securities of $3,600 would be reported as a reduction of stockholders’ equity on the
balance sheet.
B1–20
a. $6,100 ($40,000 – $33,900)
b. $2,500 debt balance ($6,100 – $3,600)
c. The available-for-sale securities would be reported as a current asset on the balance
sheet with a cost of $37,500 plus the valuation allowance for available-for-sale
securities of $2,500 for a net fair value of $40,000. The unrealized gain of $6,100 on
available-for-sale securities would be reported as an addition to stockholders’ equity
on the balance sheet.
B1–21
20Y5
Dec. 31 Unrealized Loss on Available-for-Sale
Investments 4,170 *
Valuation Allowance for Available-for-Sale
Investments 4,170
To record decrease in fair value of
available-for-sale securities.
* Available-for-sale investments at fair value, December 31 ………………… $ 39,120
Less available-for-sale investments at cost, December 31 ………………… (43,290)
Unrealized loss on available-for-sale investments…………………………… $ (4,170)
B1–22
20Y7
Dec. 31 Valuation Allowance for Available-for-Sale
Investments 3,830 *
Unrealized Gain on Available-for-Sale
Investments 3,830
To record increase in fair value of
available-for-sale securities.
* Available-for-sale investments at fair value, December 31 ………………… $ 22,870
Less available-for-sale investments at cost, December 31 ………………… (19,040)
Unrealized gain on available-for-sale investments…………………………… $ 3,830
B1-8
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
Contact Email:
, APPENDIX B
SELECTED TOPIC
TOPIC 1: INVESTMENTS
ASSIGNMENTS
B1–1
Held-to-maturity, trading, and available-for-sale securities
B1–2
The primary objective of investing in held-to-maturity securities is to earn
interest revenue and collect the face value of the security at its maturity date.
B1–3
Cost method
B1–4
Held-to-maturity securities that will mature within one year are reported as
current assets. Securities maturing beyond one year are reported as long-term
assets.
B1–5
a. Investments—Vasquez City Bonds 420,000
Interest Receivable 6,300
Cash 426,300
b. Cash ($420,000 × 6% × 1/2) 12,600
Interest Receivable 6,300
Interest Revenue 6,300
c. Cash 208,950 *
Loss on Sale of Investments 2,100
Interest Revenue 1,050
Investments—Vasquez City Bonds 210,000
* Sales proceeds ($210,000 × 99%)……………………………………
$207,900
Accrued interest………………………………………………………… 1,050
Total proceeds from sale……………………………………………… $208,950
d. Cash 210,000
Investments—Vasquez City Bonds 210,000
B1-1
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–6
a. Investments—Hotline Inc. Bonds 180,000
Interest Receivable 1,500
Cash 181,500
b. Cash ($180,000 × 5% × 1/2) 4,500
Interest Receivable 1,500
Interest Revenue 3,000
c. Cash 92,550 *
Interest Revenue 750
Gain on Sale of Investments 1,800
Investments—Hotline Inc. Bonds 90,000
* Sales proceeds ($90,000 × 102%)……………………………… $91,800
Accrued interest…………………………………………………… 750
Total proceeds from sale………………………………………… $92,550
d. Cash 90,000
Investments—Hotline Inc. Bonds 90,000
B1–7
a. May 1 Investments—Marimar Co. Bonds 150,000
Cash 150,000
b. Nov. 1 Cash 4,500
Interest Revenue 4,500
$150,000 × 6% × 6/12.
c. Nov. 1 Cash ($55,000 × 98%) 53,900
Loss on Sale of Investments 1,100
Investments—Marimar Co. Bonds 55,000
d. Dec. 31 Interest Receivable 950
Interest Revenue 950
Accrued interest [($150,000 –
$55,000) × 6% × 2/12].
B1-2
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–8
a. 20Y1
Oct. 1 Investments—Effenstein Corp. Bonds 240,000
Cash 240,000
b. 20Y1
Dec. 31 Interest Receivable 4,800
Interest Revenue 4,800
Accrued interest ($240,000 × 8%
× 3/12).
c. 20Y2
Apr. 1 Cash 9,600
Interest Receivable 4,800
Interest Revenue ($240,000 × 8% × 3/12) 4,800
d. 20Y2
Apr. 1 Cash ($90,000 × 102%) 91,800
Gain on Sale of Investments 1,800
Investments—Effenstein Corp. Bonds 90,000
e. 20Y8
Oct. 1 Cash 150,000
Investments—Effenstein Corp. Bonds 150,000
B1-3
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–9
a. Year 1
May 1 Investments—Lumpkin County Bonds 360,000
Interest Receivable 1,800 *
Cash 361,800
* $360,000 × 6% × 1/12
b. Oct. 1 Cash ($360,000 × 6% × 1/2) 10,800
Interest Receivable 1,800
Interest Revenue 9,000
c. Oct. 31 Cash 88,650 *
Loss on Sale of Investments 1,800
Interest Revenue 450
Investments—Lumpkin County Bonds 90,000
* Bond sale ($90,000 × 98%)…………………………… $88,200
Accrued interest ($90,000 × 6% × 1/12)…………… 450
Total proceeds………………………………………… $88,650
d. Dec. 31 Interest Receivable 2,700
Interest Revenue 2,700
($270,000 × 6% × 2/12).
e. Year 20
Apr. 1 Cash 270,000
Investments—Lumpkin County Bonds 270,000
B1-4
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–10
a. Jan. 31 Investments—Government Bonds 75,000
Interest Receivable 375 *
Cash 75,375
* $75,000 × 6% × 1/12
July 1 Cash ($75,000 × 6% × 1/2) 2,250
Interest Receivable 375
Interest Revenue 1,875
Aug. 30 Cash 34,650 *
Loss on Sale of Investments 700
Interest Revenue 350
Investments—Government Bonds 35,000
* Bond sale ($35,000 × 98%)………………………………… $34,300
Accrued interest ($35,000 × 6% × 2/12)…………………… 350
Total proceeds from sale…………………………………… $34,650
b. Dec. 31 Interest Receivable 1,200
Interest Revenue 1,200
Accrued interest ($40,000 ×
6% × 1/2).
c. July 1 Cash 40,000
Investments—Government Bonds 40,000
B1–11
The primary objective of investing in trading securities is to earn profits from
short-term changes in their market prices.
B1–12
Fair value method
B1–13
a. The trading securities would be reported as a current asset as follows:
Trading investments (at cost) $50,000
Valuation allowance for trading investments 11,500
Trading investments (at fair value) $61,500
b. The increase in value of the securities of $11,500 would be reported on the
income statement as an unrealized gain on trading investments as part of
“Other revenue.”
B1-5
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–14
20Y3
Dec. 31 Unrealized Loss on Trading Investments 37,000 *
Valuation Allowance for Trading Investments 37,000
To record decrease in fair value of
trading investments.
* Trading investments at fair value, December 31 ……………………………… $ 309,000
Less trading investments at cost………………………………………………… (346,000)
Unrealized loss on trading investments………………………………………… $ (37,000)
B1–15
20Y9
Dec. 31 Valuation Allowance for Trading Investments 6,500 *
Unrealized Gain on Trading Investments 6,500
To record increase in fair value of
trading investments.
* Trading investments at fair value, December 31 ……………………………… $ 79,100
Less trading investments at cost………………………………………………… (72,600)
Unrealized gain on trading investments………………………………………… $ 6,500
B1–16
a. 20Y7
Feb. 24 Trading Investments—Raiders Inc. 551,000
Cash 551,000
Dec. 31 Valuation Allowance for Trading Investments 58,000
Unrealized Gain on Trading Investments 58,000
To record increase in fair value of trading
investments ($609,000 – $551,000).
b. An unrealized gain or unrealized loss on trading investments is reported
on the income statement as part of “Other revenue (loss)” (or a separate item
if significant). Unrealized losses would be deducted in determining net income,
while unrealized gains would be added in determining net income.
B1-6
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–17
a. 20Y3
Dec. 31 Unrealized Loss on Trading Investments 1,950
Valuation Allowance for Trading
Investments 1,950
To record decrease in fair value of
trading investments
($115,550 – $117,500).
b. 20Y4
May 10 Trading Investments—Carroll Inc. 34,900
Cash 34,900
c. 20Y4
Dec. 31 Valuation Allowance for Trading Investments 24,550 *
Unrealized Gain on Trading Investments 24,550
To record the increase in fair value of
trading investments.
* The adjusted December 31, 20Y4, balance of Valuation Allowance for Trading Investments
should be a debit balance of $22,600, as follows:
Fair value of the portfolio of trading securities................................. $ 175,000
Cost of trading securities:
Griffin Inc. ....................................................................................... $40,000
Luck Company................................................................................. 37,500
Wilson Company............................................................................. 40,000
Carroll Inc. ...................................................................................... 34,900
Total cost ................................................................................... (152,400)
Valuation allowance on December 31, 20Y4...................................... $ 22,600
Since Valuation Allowance for Trading Investments has a January 1, 20Y4, credit balance of
$1,950, the adjustment must be $24,550, as follows:
Valuation Allowance for Trading Investments
20Y4 20Y4
Dec. 31 Adj. 24,550 Jan. 1 Bal. 1,950
Dec. 31 Adj. Bal. 22,600
d. $175,000; the fair value of the trading investments, which is the sum of the
trading investments account of $152,400 and the valuation account of $22,600.
B1–18
Fair value method
B1-7
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, APPENDIX B Topic 1: Investments
B1–19
The available-for-sale securities would be reported as a current asset on the balance
sheet with a cost of $37,500 less the valuation allowance for available-for-sale securities
of $3,600 for a net fair value of $33,900. The unrealized loss on available-for-sale
securities of $3,600 would be reported as a reduction of stockholders’ equity on the
balance sheet.
B1–20
a. $6,100 ($40,000 – $33,900)
b. $2,500 debt balance ($6,100 – $3,600)
c. The available-for-sale securities would be reported as a current asset on the balance
sheet with a cost of $37,500 plus the valuation allowance for available-for-sale
securities of $2,500 for a net fair value of $40,000. The unrealized gain of $6,100 on
available-for-sale securities would be reported as an addition to stockholders’ equity
on the balance sheet.
B1–21
20Y5
Dec. 31 Unrealized Loss on Available-for-Sale
Investments 4,170 *
Valuation Allowance for Available-for-Sale
Investments 4,170
To record decrease in fair value of
available-for-sale securities.
* Available-for-sale investments at fair value, December 31 ………………… $ 39,120
Less available-for-sale investments at cost, December 31 ………………… (43,290)
Unrealized loss on available-for-sale investments…………………………… $ (4,170)
B1–22
20Y7
Dec. 31 Valuation Allowance for Available-for-Sale
Investments 3,830 *
Unrealized Gain on Available-for-Sale
Investments 3,830
To record increase in fair value of
available-for-sale securities.
* Available-for-sale investments at fair value, December 31 ………………… $ 22,870
Less available-for-sale investments at cost, December 31 ………………… (19,040)
Unrealized gain on available-for-sale investments…………………………… $ 3,830
B1-8
© 2027 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
