C1. CVS indicates in Note 1 that it has some short-term investments that consist of certificates of deposit.

How has CVS classified those CDs for accounting purposes?

“These investments, which were classified as available-for-sale within Level 1 of the fair value hierarchy, were carried at fair value, which approximated their historical cost at December 31, 2015 and 2014.”

Per CVS’s balance sheet, what was the balance in CVS’s short-term investments as of Dec 31, 2015 and Dec 31, 2014?

2015: $88 million    2014: $34 million

Per CVS’s statement of cash flows, what cash transactions affected short-term investments during 2015?

Financing activities decreased short-term debt

Prepare a T-account that summarizes transactions affecting CVS’s short-term investments during 2015. Speculate as to the explanation for any plug figure necessary to make the T-account balance.

C2. Per Note 1, CVS has equity-method investments in SureScripts, LLC and in Heartland Healthcare Services. CVS indicates that those investments are immaterial for the year ended Dec 31, 2015. Assuming that the Heartland investment is material:

How would Heartland’s earnings affect CVS’s income statement?

How would Heartland’s earnings affect CVS’s balance sheet?

Answer rating: 100% (QA)

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