This assignment is based on the spreadsheet prepared in (1) of the cumulative spreadsheet assignment for Chapter 13. Review that assignment for a summary of the assumptions made in preparing a forecasted balance sheet, income statement, and statement of cash flows for 2012 for Skywalker Company. This assignment involves changing assumption (h) in the Chapter 13 assignment.

                    

As mentioned in the Chapter 13 assignment, Skywalker intends to invest another $28 in available-for-sale securities (security F) in 2012 in order to increase the total value of the portfolio by 40% to $98 ($70 + $28).

Because Skywalker cannot predict future stock prices, the best forecast is that the fair values of Securities A through E will remain the same during 2012 and that the fair value of security F, to be acquired in 2012 for $28, will remain at $28.

Revise the spreadsheet made in (1) of the Chapter 13 assignment in accordance with the above and following assumptions. In each case, any gains or losses expected to be realized in 2012 should be reported in a separate income statement line, “Investment income, net.”

1. Skywalker intends to sell security A in 2012 at an anticipated price of $22. That $22 will be used to buy security G. Skywalker’s best forecast is that the fair value of security G will remain at $22 through the end of 2012.
2. How does the sale of security A in (1) impact expected cash from operating activities in 2012? Explain.
3. Repeat (1) and (2) assuming that, instead of selling security A, Skywalker intends to sell security D in 2012 at an anticipated price of $15, which will be used to buy security G. Skywalker’s best forecast is that the fair value of security G will remain at $15 through the end of 2012.