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Chapter 8
Long-Term Investments &
the Time Value of Money

Ethics Check

(5-10 min.) EC 8-1

a. Due care
b. Objectivity and independence
c. Integrity
d. Integrity

Chapter 8 Long-Term Investments & the Time Value of Money 8-1

Copyright © 2017 Pearson Education Inc.
Short Exercises

(5-10 min.) S 8-1

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Jan. 1 Held-to-Maturity Investment in Bonds ......... 10,000
Cash .......................................................... 10,000

July 1 Cash ($10,000 × .05 × 6/12) ........................... 250

Interest Revenue ...................................... 250

(5-10 min.) S 8-2

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Jan. 1 Held-to-Maturity Investment in Bonds
($100,000 × .90) ............................................. 90,000
Cash .......................................................... 90,000

July 1 Cash ($100,000 × .055 × 6/12) ....................... 2,750

Interest Revenue ...................................... 2,750

(5-10 min.) S 8-3

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
July 1 Held-to-Maturity Investment in Bonds
($100,000 – $90,000)/10 interest periods).... 1,000
Interest Revenue ...................................... 1,000

Total interest revenue = $2,750 + $1,000 = $3,750

8-2 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (5-10 min.) S 8-4

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Dec. 31 Interest Receivable ($100,000 × .055 × 6/12) ... 2,750
Interest Revenue....................................... 2,750

31 Held-to-Maturity Investment in Bonds

($100,000 – $90,000)/10 interest periods) .... 1,000
Interest Revenue....................................... 1,000

Balance sheet reports Held-to-Maturity Investment in Bonds of $92,000

($90,000 + $1,000 + $1,000).

Income statement reports Interest Revenue of $7,500 ($2,750 + $1,000 +

$2,750 + $1,000).

(5-10 min.) S 8-5

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
July 1 Interest Revenue .................................................... 750
Held-to-Maturity Investment in Bonds
[($100,000 × 1.075) – $100,000]/10 interest
periods............................................................. 750

Total interest revenue = ($100,000 × .12 × 6/12) – $750 = $5,250

Chapter 8 Long-Term Investments & the Time Value of Money 8-3

Copyright © 2017 Pearson Education Inc.
 (5-10 min.) S 8-6

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Dec. 31 Interest Receivable ($100,000 × .12 × 6/12) .... 6,000
Interest Revenue ...................................... 6,000

31 Interest Revenue ........................................... 750

Held-to-Maturity Investment in Bonds
[($100,000 × 1.075) – $100,000]/10 interest
periods ............................................................ 750

Balance sheet reports Held-to-Maturity Investment in Bonds of $106,000

($107,500 – $750 – $750).

Income statement reports Interest Revenue of $10,500 ($6,000 – $750 +

$6,000 – $750).

(10-15 min.) S 8-7

1. $1,300,000 × 1.03 = $1,339,000 paid to purchase Amexon bonds.
HW will collect $1,300,000 at maturity.

2. $1,300,000 × .05 = $65,000 annual cash interest payment

3. Interest Revenue will be less than the amount of cash interest

received because the investor purchased the bond at a premium.
The investor will collect only the face amount of the bonds at
maturity. The difference between the purchase price and the
maturity value (the premium) is a reduction in interest revenue
over the life of the bonds.

4. Cash interest received each year .............................. $65,000

$1,339,000 − $1,300,000
− Amortization = Amortization
(7,800)
5 years
= Annual interest revenue ............................................ $57,200

8-4 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10-15 min) S 8-8

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
a. June 30 Held-to-Maturity Investment in Bonds
($1,300,000 × 1.03) ........................................ 1,339,000
Cash .......................................................... 1,339,000

b. Dec. 31 Cash ($1,300,000 × .05 × 6/12) ...................... 32,500

Interest Revenue ...................................... 32,500

c. 31 Interest Revenue ........................................... 3,900

Held-to-Maturity Investment in Bonds
[($1,339,000 – $1,300,000) / 5 × 6/12] ........... 3,900

2021
d. June 30 Cash ...............................................................1,300,000
Held-to-Maturity Investment in Bonds .... 1,300,000

(5-10 min) S 8-9

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Mar. 23 Investment in AFSS (1,000 × $81.34) ............ 81,340
Cash .......................................................... 81,340

June 22 Cash (1,000 × $0.29) ....................................... 290

Dividend Revenue .................................... 290

Chapter 8 Long-Term Investments & the Time Value of Money 8-5

Copyright © 2017 Pearson Education Inc.
 (5-10 min) S 8-10

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Dec. 31 Allowance to Adjust Investment in AFSS to 2,820
Market [(1,000 × $84.16) – $81,340] ..............
Unrealized Gain on Investment in AFSS 2,820

(5-10 min) S 8-11

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2017
Nov. 22 Unrealized Gain on Investment in AFSS ...... 2,820
Allowance to Adjust Investment in AFSS 2,820
to Market ..................................................

22 Cash ............................................................... 74,500

Loss on Sale of Investment in AFSS ............ 6,840
Investment in AFSS ................................. 81,340

8-6 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (15-20 min.) S 8-12
Req. 1

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Apr. 10 Investment in AFSS (300 × $20) .................... 6,000
Cash .......................................................... 6,000

July 22 Cash (300 × $1.29) .......................................... 387

Dividend Revenue .................................... 387

Dec. 31 Unrealized Loss on Investment in AFSS ...... 200

Allowance to Adjust Investment in AFSS
to Market ($6,000 − $5,800) ...................... 200

Req. 2

The income statement will report dividend revenue of $387. The

statement of comprehensive income will report an unrealized loss on
available-for-sale securities of $200.

Req. 3

ASSETS
Total current assets …………………………………........ $ XXX
Long-term assets:
Investment in AFSS………………………………........ 5,800

STOCKHOLDERS’ EQUITY
Common stock …………………………………………….. $ XXX
Retained earnings .………………………………………… XXX
Accumulated other comprehensive income:
Unrealized (loss) on investment in AFSS…………… (200)

Chapter 8 Long-Term Investments & the Time Value of Money 8-7

Copyright © 2017 Pearson Education Inc.
 (5-10 min.) S 8-13

Req. 1

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2017
May 21 Allowance to Adjust Investment in AFSS to
Market ........................................................ 200
Unrealized Loss on Investment in AFSS 200

Cash (300 × $30) ....................................... 9,000

Investment in AFSS ............................ 6,000
Gain on Sale of Investment in AFSS .. 3,000

Req. 2

This gain on sale of investment is a realized gain. The loss recorded at

December 31, 2016, was unrealized because it resulted from a change in
the investment’s market value, not from the sale of the investment.

8-8 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) S 8-14

Req. 1

Equity method is appropriate because the investor (Eastern Motors)

holds a 30% investment in the investee company (Tripp Motors).

Req. 2

Journal
ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Millions
a. Equity-Method Investment ..................................... 430
Cash ................................................................... 430
To purchase equity-method investment.

b. Equity-Method Investment ($80 × .30) ................... 24

Equity-Method Investment Revenue ................ 24
To record investment revenue.

c. Cash ($40 × .30) ....................................................... 12

Equity-Method Investment ................................ 12
To receive cash dividend on equity-method
investment.

Req. 3

Equity-Method Investment
(Amounts in millions)
Purchase 430 Dividends received 12
Net income 24
Balance 442

Chapter 8 Long-Term Investments & the Time Value of Money 8-9

Copyright © 2017 Pearson Education Inc.
 (5 min.) S 8-15

Millions
Sale proceeds ................................................................... $ 125
− Carrying amount of the investment ($442 / 2)................. (221)
= (Loss) on sale of investment ........................................... $ (96)

(10 min.) S 8-16

1. A parent company is a corporation that owns a controlling (more than

50%) interest in another company. A subsidiary company is a
company that is controlled by another corporation.

2. Consolidated financial statements combine the balance sheets,

income statements, statements of stockholders’ equity, and cash-flow
statements of a parent company with those of its subsidiaries as if the
parent and its subsidiaries were one company.

3. The parent company’s name appears on the consolidated financial

statements. To consolidate, the parent company must own more than
50% of the subsidiary’s stock.

8-10 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10 min.) S 8-17

1. Goodwill is an intangible asset. Goodwill is the excess of the

purchase price to acquire a subsidiary company over the sum of the
market value of the subsidiary’s net assets (assets minus liabilities).
Only the parent company reports the goodwill. Goodwill appears as
an intangible asset on the consolidated balance sheet. Goodwill must
be written down when its value is deemed to be impaired.

2. Noncontrolling interest arises when a parent company owns less than

100% of a subsidiary’s stock. The noncontrolling interest represents
the subsidiaries’ stock that is owned by stockholders other than the
parent company. The parent company can report noncontrolling
interest on its consolidated balance sheet among the stockholders’
equity.

(5 min.) S 8-18

1. Operating
Investing — Most closely related to this chapter
Financing

2. Purchase of investment (or acquisition of other companies)

Sale of investment (or sale of other companies)

Chapter 8 Long-Term Investments & the Time Value of Money 8-11

Copyright © 2017 Pearson Education Inc.
 (10 min.) S 8-19

DATE: Early in 2017

TO: The Ink Spot Company Stockholders
FROM: Chief Executive Officer
RE: Investing Activities During 2016

Ink Spot Company’s investing activities used more cash than the
previous year principally due to the increase in purchases of property,
plant, and equipment and acquisitions and investments. The cash used
for investing activities was partially offset by an increase in cash flow
from the disposal of investments and from the disposal of property,
plant, and equipment.

Investing activities for Ink Spot were financed mainly with cash provided
by operating activities, which was significantly higher than the previous
year. As you can see, issuances of debt and stock were lower than the
previous year. Because of the large increase from the previous year in
net positive cash flow from operations, Ink Spot Company was able to
invest in the additional assets and investments without increasing their
borrowing as compared to the previous year.

Student responses may vary.

8-12 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (5-10 min.) S 8-20

1. $12,000 x .621 (PV of $1, 5 periods, 10%) = $7,452

2. $12,000 x 3.791 (PV of an annuity, 5 periods, 10%) = $45,492

(5-10 min.) S 8-21

1. $6,743.26 EXCEL formula = PV(1%,60,-150)

2. $10,871.63 EXCEL formula = PV(1%,60,-150,-7500)

Chapter 8 Long-Term Investments & the Time Value of Money 8-13

Copyright © 2017 Pearson Education Inc.
Exercises

(15-20 min.) E8-22A

Req. 1

Rentex, Inc., should use the amortized-cost method to account for the
long-term investment in bonds.

Req. 2

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Sept. 30 Held-to-Maturity Investment in Bonds
($30,000 × .97)................................................ 29,100
Cash .......................................................... 29,100
To purchase bond investment.

Dec. 31 Interest Receivable ($30,000 × .06 × 3/12) ...... 450

Interest Revenue ...................................... 450
To accrue interest revenue.

31 Held-to-Maturity Investment in Bonds

[($30,000 – $29,100) / 5 × 3/12) ...................... 45
Interest Revenue ...................................... 45
To amortize discount on bond investment.

Req. 3

Balance sheet (partial)

ASSETS
Current assets:
Interest receivable ........................................................... $ 450

Long-term assets:
Held-to-maturity investment in bonds
($29,100 + $45) ................................................................ $29,145

8-14 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-23A

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

a. Investment in AFSS (400 × $35)....................... 14,000

Cash ............................................................. 14,000

b. Cash (400 × $1.60) ............................................ 640

Dividend Revenue ....................................... 640

c. Allowance to Adjust Investment in AFSS

to Market [400 × ($42 − $35)] ............................ 2,800
Unrealized Gain on Investment in AFSS .... 2,800

d. Unrealized Gain on Investment in AFSS ......... 2,800

Allowance to Adjust Investment in AFSS
to Market ...................................................... 2,800

Cash (400 × $25) ............................................... 10,000

Loss on Sale of Investment in AFSS............... 4,000
Investment in AFSS .................................... 14,000

Chapter 8 Long-Term Investments & the Time Value of Money 8-15

Copyright © 2017 Pearson Education Inc.
 (15-25 min.) E 8-24A

Req. 1

Stock Cost Fair Value

Canada (3,800 × $38.00) = $144,400 (3,800 × $29.125) = $110,675

Brazil (640 × $47.25) = 30,240 (640 × $49.25) = 31,520

Russian (1,500 × $77.00) = 115,500 (1,500 × $69.50) = 104,250

Total ............................................ $290,140 ............................... $246,445

Req. 2

Dec. 31 Unrealized Loss on Investments in

AFSS ($290,140 − $246,445).................... 43,695
Allowance to Adjust Investments
in AFSS to Market ........................... 43,695

Req. 3

Statement of Comprehensive Income (partial):

Other comprehensive income:

Unrealized (loss) on investments in AFSS ............ $(43,695)

Balance Sheet (partial):

ASSETS
Long-term assets:
Investments in AFFS.................................................... $246,445

STOCKHOLDERS’ EQUITY
Accumulated other comprehensive income:
Unrealized (loss) on investments in AFSS ............ $(43,695)

8-16 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-25A

Req. 1

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

a. Equity-Method Investment ............................ 1,500,000

Cash .......................................................... 1,500,000
Purchased equity-method investment.

b. Equity-Method Investment ($670,000 × .40). 268,000

Equity-Method Investment Revenue....... 268,000
To record investment revenue.

c. Cash ($440,000 × .40) .................................... 176,000

Equity-Method Investment ...................... 176,000
To receive cash dividend on equity-method investment.

Req. 2

Ending balance in the investment account:

$1,592,000 ($1,500,000 + $268,000 − $176,000)

Chapter 8 Long-Term Investments & the Time Value of Money 8-17

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-26A

Equity-Method Investment
a. Purchase 1,500,000 c. Dividends 176,000
b. Net income 268,000
Balance 1,592,000

Proceeds from sale of investment .................. $1,500,000

Carrying amount of investment ...................... (1,592,000)
(Loss) on sale of investment ........................... $ (92,000)

8-18 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (15-20 min.) E 8-27A

Req. 1

The equity method is appropriate for a 30% investment in another

company’s common stock. Equity method is used for 20-50%
investments.

Req. 2

Balance sheet (partial):

ASSETS
Long-term assets:
Equity-method investment ........................................... $524,000*

Income statement (partial):

Other revenue
Equity-method investment revenue ............................ $ 66,000

_____
*Explanation:
Equity-Method Investment
Cost 500,000
Share of net income Share of dividends
($220,000 × 0.30) 66,000 ($140,000 × .30) 42,000
Balance 524,000

Chapter 8 Long-Term Investments & the Time Value of Money 8-19

Copyright © 2017 Pearson Education Inc.
 (20-25 min.) E 8-28A
Req. 1 (consolidation work sheet and balance sheet)
Nutone Othello ELIMINATION CONSOLIDATED
ASSETS Inc. Corp. DEBIT CREDIT BALANCE SHEET
Cash 46,000 20,000 66,000
Accounts receivable, net 81,000 53,000 134,000
Note receivable from Nutone — 42,000 (b) 42,000 —
Inventory 59,000 84,000 143,000
Plant assets, net 289,000 91,000 380,000
Investment in Othello Corp. 107,000 — (a)107,000 —
Other assets 29,000 10,000 39,000
Total 611,000 300,000 762,000

LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable 48,000 20,000 68,000
Notes payable 145,000 39,000 (b) 42,000 142,000
Other liabilities 77,000 134,000 211,000
Common stock 105,000 85,000 (a) 85,000 105,000
Retained earnings 236,000 22,000 (a) 22,000 _______ 236,000
Total 611,000 300,000 149,000 149,000 762,000

Req. 2
The stockholders’ equity of the consolidated entity is $341,000 ($105,000 + $236,000).
8-20 Financial Accounting 11/e Solutions Manual
Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-29A

German Subsidiary:
EXCHANGE
EUROS RATE DOLLARS
Assets 650,000 $1.326 $861,900

Liabilities 300,000 1.326 $397,800

Stockholders’ equity:
Common stock 55,000 1.06 58,300
Retained earnings 295,000 1.19 351,050
Accumulated other
comprehensive income:
Foreign-currency
translation adjustment 54,750

650,000 $861,900

During this period, the euro was stronger than the dollar. The strong
euro produced the positive translation adjustment.

Chapter 8 Long-Term Investments & International Operations 8-21

Copyright © 2017 Pearson Education Inc.
 (15-20 min.) E 8-30A

Req. 1

Honey Bakery
Statement of Cash Flows (partial)
Fiscal Year 2016
Millions
Cash flows from investing activities:
Capital expenditures ...................................................... $(10.0)
Sale of property, plant, and equipment ......................... 7.3
Sale of other businesses ............................................... 1.4
Purchase of long-term investments .............................. (11.5)
Sale of long-term investments....................................... 2.5
Net cash (used) in investing activities ....................... $(10.3)

Based on Honey Bakery’s investing activities, it appears that the

company is growing. Acquisitions of long-term assets and
investments are greater than the sales of long-term assets and other
businesses. Capital expenditures of $10.0 million exceed the sale of
PPE of $7.3 million.

8-22 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (20-25 min.) E 8-31A

Req. 1

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

Cash ................................................... 3,116,000

Notes Receivable ....................... 3,116,000

Short-Term Investments .................... 3,465,000

Cash ............................................ 3,465,000

Cash .................................................... 1,409,000

Accumulated Depreciation—Equip. .. 3,691,000
Equipment .................................. 5,100,000

Cash .................................................... 515,000

Investments ................................ 500,000
Gain on Sale of Investments ..... 15,000

Property and Equipment .................... 1,770,000

Cash ............................................ 1,770,000

(5-10 min.) E 8-32A

$9,395.29 EXCEL formula =PV(3.5%,16,-300,-10000,0)

Chapter 8 Long-Term Investments & International Operations 8-23

Copyright © 2017 Pearson Education Inc.
 (15-20 min.) E 8-33B

Req. 1

Baytex should use the amortized-cost method to account for the long-
term investment in bonds.

Req. 2
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2016
Sept. 30 Held-to-Maturity Investment in Bonds
($46,000 × .97) .............................................. 44,620
Cash ......................................................... 44,620
To purchase bond investment.

Dec. 31 Interest Receivable ($46,000 × .05 × 3/12) ...... 575

Interest Revenue ..................................... 575
To accrue interest revenue.

31 Held-to-Maturity Investment in Bonds

[($46,000 − $44,620) / 60 mo. × 3 mo.] ......... 69
Interest Revenue ..................................... 69
To amortize discount on bond investment.

Req. 3

Balance sheet (partial)

ASSETS
Current:
Interest receivable ......................................................... $ 575

Long-term:
Held-to-maturity investment in bonds
($44,620 + $69) ............................................................... $44,689

8-24 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-34B

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

a. Investment in AFSS (410 × $31) ............................. 12,710

Cash .................................................................... 12,710

b. Cash (410 × $1.10)................................................... 451

Dividend Revenue .............................................. 451

c. Allowance to Adjust Investment in AFSS

to Market [410 × ($36 − $31)] .................................. 2,050
Unrealized Gain on Investment in AFSS .......... 2,050

d. Unrealized Gain on Investment in AFSS ............... 2,050

Allowance to Adjust Investment in AFSS to
Market................................................................. 2,050

Cash (410 × $27)...................................................... 11,070

Loss on Sale of Investment in AFSS ..................... 1,640
Investment in AFSS ........................................... 12,710

Chapter 8 Long-Term Investments & International Operations 8-25

Copyright © 2017 Pearson Education Inc.
 (15-25 min.) E 8-35B
Req. 1

Stock Cost Fair Value

Dublin (2,800 × $35) = $ 98,000 (2,800 × $28.125) = $ 78,750

Chile (590 × $45.50) = 26,845 (590 × $48.00) = 28,320

Russian (1,000 × $70) = 70,000 (1,000 × $63.25) = 63,250

Total ............................................ $194,845 .............................. $170,320

Req. 2

Dec. 31 Unrealized Loss on Investments in

AFSS ($194,845 − $170,320) .................... 24,525
Allowance to Adjust Investments in
AFSS to Market ................................ 24,525

Req. 3

Statement of Comprehensive Income (partial):

Other comprehensive income:

Unrealized (loss) on investments in AFSS .............. $ (24,525)

Balance Sheet (partial):

ASSETS
Long-term assets:
Investments in AFSS ..................................................... $170,320

STOCKHOLDERS’ EQUITY
Accumulated other comprehensive income:
Unrealized (loss) on investments in AFSS .............. $ (24,525)

8-26 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-36B

Req. 1

Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

a. Equity-Method Investment ............................ 1,300,000

Cash........................................................... 1,300,000
Purchased equity-method investment.

b. Equity-Method Investment ($680,000 × .30) . 204,000

Equity-Method Investment Revenue ....... 204,000
To record investment revenue.

c. Cash ($450,000 × .30) .................................... 135,000

Equity-Method Investment ....................... 135,000
To receive cash dividend on equity-method investment.

Req. 2

Ending balance in the investment account:

$1,369,000 ($1,300,000 + $204,000 − $135,000)

Chapter 8 Long-Term Investments & International Operations 8-27

Copyright © 2017 Pearson Education Inc.
 (10-15 min.) E 8-37B

Equity-Method Investment
a. Purchase 1,300,000 c. Dividends 135,000
b. Net income 204,000
Balance 1,369,000

Proceeds from sale of investment ............. $1,000,000

Carrying amount of investment .................. (1,369,000)
(Loss) on sale of investment ...................... $ (369,000)

8-28 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
 (15-20 min.) E 8-38B

Req. 1

The equity method is appropriate for a 45% investment in another

company’s common stock. Equity method is used for 20-50%
investments.

Req. 2

Balance sheet (partial):

ASSETS
Long-term assets:
Equity-method investment ............................................ $626,250*

Income statement (partial):

Other revenue
Equity-method investment revenue ............................. $117,000

_____
*Explanation:
Equity-Method Investment
Cost 570,000
Share of net income Share of dividends
($260,000 × .45) 117,000 ($135,000 × .45) 60,750
Balance 626,250

Chapter 8 Long-Term Investments & International Operations 8-29

Copyright © 2017 Pearson Education Inc.
 (20-25 min.) E 8-39B
Req. 1 (consolidation work sheet and balance sheet)
Gamma, Cressida ELIMINATION CONSOLIDATED
ASSETS Inc. Corp. DEBIT CREDIT BALANCE SHEET
Cash 54,000 14,000 68,000
Accounts receivable, net 80,000 55,000 135,000
Note receivable from Gamma — 40,000 (b) 40,000 —
Inventory 53,000 84,000 137,000
Plant assets, net 290,000 99,000 389,000
Investment in Cressida Corp. 98,000 — (a) 98,000 —
Other assets 24,000 8,000 32,000
Total 599,000 300,000 761,000

LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable 46,000 28,000 74,000
Notes payable 154,000 36,000 (b) 40,000 150,000
Other liabilities 78,000 138,000 216,000
Common stock 113,000 85,000 (a) 85,000 113,000
Retained earnings 208,000 13,000 (a) 13,000 _______ 208,000
Total 599,000 300,000 138,000 138,000 761,000

Req. 2
The stockholders’ equity of the consolidated entity is $321,000 ($113,000 + $208,000).

8-30 Financial Accounting 11/e Solutions Manual

Copyright © 2017 Pearson Education Inc.
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somebody else, surely that would show him 'twas wasting his time to
grizzle any more about her."

"I'll thank you to look at it different, Jerry," said Jane sharply. "If I hate
a man, for very good reasons, then you ought to do the same. I can see into
things a lot deeper than what you can, as you've always granted, and I can
see into Maynard. He's the silent, shifty sort, deep as a well—and I won't
have you sticking up for him against me, so now then."

Jerry whistled.

"I've nothing for, or against him," he answered slowly. "I scarcely know
the man, but there's my father and others speak well of him; and I'm always
wishful to think well of everybody, unless there's a reason against."

"I'm the reason against then," she declared, "and you've got to put me
and my opinions first, I should hope. I'm a kindly creature enough, God
knows, and ban't quick to think evil."

"Certainly not," admitted Jerry.

"But I look to you to pay me the respect due," she continued, "and if I
tell you a man's doubtful, then 'tis for you to believe me and act according."

"I will," he promised. "We'm all doubtful for that matter. Us will speak
and think of the man as we find him. We needn't go out of the way to make
trouble."

"I ban't one to make trouble," she retorted; "but, next to you, John's
more to me than anybody, and I won't stand by and see him wronged by that
hateful woman, nor yet by that man, if I can stop it."

Jerry felt this attitude unreasonable, but decided the subject had better
be dropped.

"If wrong's done, I'll help to right it, that I'll swear," he promised.

"I'd right it myself," she said. "If I could prove the man had stole her
from my brother, I'd lie behind a hedge for him!"
 "Do shut up and stop telling such dreadful things," he answered roughly.
"'Tis hateful to hear such words from your mouth—Sunday and all. I won't
have it, Jane. What the hell's the matter with you?"

They were silent for a time; then having reached Hazel Tor, Jerry helped
his sweetheart to climb the great rocks. Soon they were perched high on the
granite, and Jane opened a white and blue parasol, while he stretched his
vast limbs at her feet and smoked his pipe. His elephantine playfulness and
ideas on the tobacco shop won Jane's smiles presently, and at heart Jerry
regretted the moment when his future brother-in-law ascended through the
pine-trees from the river and joined them.

The fret and sting of his hopeless quest had marked John Bamsey, and
now he was come to the knowledge that no hope remained. His dream
dissolved. Until now he had defied reason and lived on shadows spun of
desire. He had sunk beneath his old pride and returned to Dinah's hand. He
had not grovelled; but he assumed an attitude, after the passing of the first
storm, that astonished his family. And Dinah it astonished also, filling her
with fresh pain. He had hung on; he had asked her to forgive his words
upon the bridge; he had returned into the atmosphere of her and gone and
come from home as before. Dominated by his own passion, he had endured
even the wonder in his mother's eyes, the doubt in Jane's. Dinah could not
be explicit to him, since he had been careful not to give her any opportunity
for the present. But, under his humility, he had bullied her. The very
humility was a sort of bullying, and she felt first distracted and then
indignant that he should persist. To him she could not speak, but to Faith
Bamsey and Jane she could speak; and to the former she did.

Mrs. Bamsey therefore knew that Dinah was not going to marry John,
and in her heart she was thankful for it; while none the less indignant that
John's perfections should have failed of fruition for Dinah. She resented
Dinah's blindness and obstinacy, and felt thankful, for John's sake, that the
girl would never be his wife. As for Jane she had never shared her brother's
whispered hope that Dinah would return to him. She hated Dinah, and while
hot with sympathy for her brother, rejoiced that, sooner or later, her father's
foster-daughter must disappear and never be linked to a Bamsey.
 Johnny's present attitude, however, she did not know; and it was left for
this hour amid the tree girt rocks of Hazel Tor to teach her. She longed to
learn what he would say if any other man were hinted of in connection with
Dinah. She much wanted Johnny to share her opinion of Dinah, and now,
ripened for mischief by the recent sight of Maynard, she prepared to sound
Johnny. Jerry suspected what was in her mind and hoped that she would
change it. They spoke first of their own secret, and informed John, after
exacting from him promises of silence.

He was moody and his expression had changed. Care had come into his
face and its confidence had abated. He had always liked to talk, and
possessed with his own wrongs, of late, began to weary other ears. To his
few intimate friends he had already spoken unwisely and salved the wounds
of pride by assuring them that the rupture was not permanent. He had even
hinted that he was responsible for it—to give the woman he designed to
wed a lesson. He had affected confidence in the future; and now this was
not the least of his annoyances, that when the truth came in sight, certain
people would laugh behind his back. Upon such a temper it was easy to see
how any mention of another man in connection with Dinah must fall; and
had Jane really known all that was tormenting her brother's mind, at the
moment when it began to feel the truth, even she might have hesitated; but
she did not.

John considered their dreams of a shop without much sympathy and

doubted their wisdom.

"You're a woodman and only a woodman—bred to it," he declared.

"What the mischief should you make messing about among shops and
houses in a town? You know you'd hate it, just so much as I should myself,
and you know well he would, if he don't, Jane."

"You forget his feeling for me, Johnny," explained his sister. "It
wouldn't be natural to him I grant; but there's me; and what's my good be
Jerry's good when we'm married."

"You ought to think of his good, too, however. I shouldn't hide this up.
You'd do well to talk to mother before you do anything."
 "You don't think father will change about the five hundred pound?"
asked Jane. "'Twas fear of that kept us quiet."

"No; he won't change. I was to have had the same."

"And so you will have," she said. "'Tis only a question of time."

"You'll get one as feels for you, same as Jane feels for me, presently,"
ventured Jerry.

"And Dinah Waycott will get hell," added Jane; "and I dare say it may
happen to her afore so mighty long, for that matter."

Jerry shrank, for Jane's brother fastened on this.

"What d'you mean?" he asked, and she was glad he did.

"Nothing, Johnny; only I've got eyes. I ban't one to think evil; but I can't
help being pretty quick where you are concerned. You're next to Jerry, and I
shan't be a happy woman till you're a happy man, and you know it."

"What then, Jane?"

"We met Lawrence Maynard walking down the road a bit ago."

"And if you did?"

She dared greatly.

"I suppose you haven't ever heard his name along with hers?"

"'Hers'? D'you mean Dinah's? No, by God—nor any other man's! If I

did——Out with it. What are you saying, Jane?"

To hear him swear made Jerry wonder, for John had never sworn in the
past. The woodman, regarding him very anxiously, now perceived how his
face and the tone of his voice had altered. That such phenomena were
visible to Jerry's intelligence argued their magnitude.
 "She went for a long walk with him a few weeks back," said Jane. "She
made no secret about it. He took her to see a stone out Hey Tor way."

"Did he? And why didn't you tell me?"

"I was going to; but I waited to see if there was more to tell. There is no
more than that—not yet."

Johnny fell silent. His mind moved quickly. Love had already begun to
suffer a change, half chemical, half psychological, that would presently
poison it. Such passion as he had endured for Dinah would not fade and
suffer extinction in Johnny's order of mind. He came to the ordeal untried
and untested. He had till now been a thief of virtue, in the sense that he was
good and orderly, peace-loving and obedient by native bent and instinct. He
fitted into the order of things as they were and approved them. Nothing had
ever happened to make him unrestful, to incite class prejudice, or to foment
discontent with his station. He had looked without sympathy on the struggle
for better industrial conditions; he had despised doubt in the matter of
religion. He was born good: his mother had said the Old Adam must surely
be left out of him. But now came the shock, and pride prevented John from
admitting his failure to anybody else; pride, indeed, had assured him that
such a man as he must have his own way in the end.

He debated the past, and his self-respect tottered before his thoughts, as
a stout boulder shakes upon its foundations at the impact of a flood. He
stared at Jane and Jerry unseeing, and they marked the blood leap up into
his face and his eyes grow bright. This idea was new to him. What Jane said
acted perilously, for it excused to himself his gathering temper under defeat
and justified his wrath in his own sight.

"Be careful," he said. "D'you know all it means you'm saying, Jane?"

"For God's sake, unsay it, Jenny," urged her sweetheart. "You can't
know—nobody can know."

"If any other man thinks he'll have that woman——"

 John said no more; but his own thoughts surged up and seemed to be
bursting his head. A mountain of wrongs was toppling down upon him. He
forgot his companions; then became suddenly conscious of their eyes
staring into his. He looked at them as though they had been strangers,
started up, went down the rocks at a pace to threaten his neck and then was
gone through the trees, plunging straight ahead like a frightened animal.

Jerry Withycombe declared great alarm; Jane only felt the deepest
interest.

"Now you've done it," said the man.

"So much the better," she answered. "It was bound to come. I'm glad."

Meantime Maynard, musing on Jane Bamsey's curt attitude, had reached

Buckland to spend an hour or two by invitation with Enoch Withycombe.

"Time drags for you sometimes I expect," said Lawrence.

"No, I wouldn't say time drags," declared the sick man. "Time don't run
more than sixty minutes to the hour with me, though I can't say it runs less,
like it does for the young and hale and hearty people. Give me a new book
and life don't drag. And there's always memory. I've got a very good
memory—better than many who come to see me I reckon. My mind keeps
clear, and I still have the power to go over my great runs with hounds. And
I don't mix 'em. I can keep 'em separate and all the little things that
happened. You'd think they'd get muddled up; but they do not."

"That's wonderful," said Lawrence.

"Yes, I can shut my eyes and get in a comfortable position and bring it
all afore me and feel my horse pulling and my feet in the stirrups. And once
or twice of late I've dreamed dreams; and that's even better, because for the
moment, you're in the saddle again—living—living! When I wake up from
a dream like that, I make a point of thanking God for it, Maynard. I'd sooner
have a dream like that than anything man can give me now."
 "They're terrible queer things—dreams," declared the younger. "I've had
a few of late. They take hold of you when your mind's more than common
full, I reckon."

"Or your stomach—so doctor says. But that's not right. I've stuffed once
or twice—greedy like—just for the hope that when I went to sleep I'd be
hunting, but it never did anything but keep me awake. No, dreams hang on
something we can't understand I reckon; and why the mind won't lie down
and sleep with the body, sometimes, but must be off on its own, we can't
tell. But there's things said about dreams that ban't true, Lawrence. I read
somewhere that you never see the faces of the dead in dreams. That's false.
You do see 'em. I saw my brother none so long ago—not as he was when he
died, but as a little boy. And dreams be very reasonable in their unreason,
you must know, for I was a little boy too. I saw his young face and flaxen
hair, and heard him laugh, and we was busy as bees climbing up a fir-tree to
a squirrel's dray in a wood. A thing, no doubt, we'd done in life together
often enough, sixty years agone; and 'twas put into my dream, and I woke
all the better for it."

"Don't you get no sad dreams?" asked Lawrence.

"They come too. They leave you a bit down-daunted, I grant. And some
be lost, because you can't call 'em home when you wake up. You'll dream a
proper masterpiece sometimes and wake full of it; and yet, for some
mysterious working of the brain, 'tis gone, and you try to stretch after it, but
never can catch it again. I woke in tears—fancy! Yes, in tears I woke once,
long ago now; and for the life of me I didn't know what fetched 'em out of
my eyes."

"Perhaps you'd had a cruel bout of pain while you was asleep?"

"No, no; pain don't get tear or groan out of me. I'll never know what it
was."

He broke off suddenly, for a previous speech of his visitor gave him the
opening he desired.
 "You said just now you'd been dreaming, along of your mind, that was
more than common full. Was it anything interesting in particular on your
mind, or just life in general?"

"Just life as it comes along I reckon."

Enoch regarded him.

"You be looking ahead, as you've the right to do. You're a man a thought
out of the common in your understanding. You don't want to work for
another all your life, do you?"

"I never look much ahead. Sometimes the past blocks the future, and a
man's often less ambitious at thirty than he was ten years before. I don't
particular want a home of my own. A home means a lot of things I've got no
use for."

"Pretty much what some of the maidens think," said Enoch with craft.
"For them a home means a man; and for us it means a woman, of course,
because we can't very well establish anything to be called home without
one. Orphan Dinah wants badly to be off, so Ben Bamsey, her foster-father,
tells me. And yet he's in a quandary; because he feels that if a happy home
were in sight for her, he'd far sooner she waited for it, a year or more, than
left him to go somewhere else."

"A very reasonable thought. But these things don't fall out as we want
'em to."

They fenced a little, but Lawrence was very guarded and committed
himself to no opinion of Dinah until Enoch, failing in strategy, tried a direct
question.

"What do you think of Orphan Dinah as a woman?" he asked.

"I like her," answered the other frankly. "Since you ask, there's no harm
in saying I think she's a very fine character. She haven't shone much of late,
because there was a lot of feeling about what she done; and it's been made
the most of I can see by women, and some men. But she's made it clear to
me and to you, I hope, that she did right. She's built on a pretty big pattern
and she's had a lot to put up with, and she's been very patient about it."

"A bit out of the common you'd say?"

"I think she is."

"I may tell you, for your ear alone, Maynard, that she thinks very well
of you."

Lawrence tightened his lips.

"No, no—don't you say that. She don't know me. I dare say, if she was
to, she'd feel different."

"Dinah can't hide herself from her foster-father's eyes," explained

Enoch. "She don't try to for that matter, and Ben sees that there's something
about you that interests her; and you've told me there be something to her
that interests you. And what follows? I'm only an old man speaking, and
you mustn't take offence whether or no."

"There's no offence," answered Lawrence. "You'd not offend anybody.

But I'd rather not have any speech about it, Mr. Withycombe."

Enoch had said all he desired to say and learned all he wanted to learn.

"And quite right and proper," he answered. "These things are very safe
where they belong, and I wouldn't rush into a man's private affairs for
money."

"You've been a very good friend to me and made my mind bigger,"

declared Lawrence. "A man that can preach patience from your bed of pain,
like you do, did ought to be heard. It ain't easy I should reckon."

They talked of Enoch's books and his master, who had lately been to see
him.

"There's one who fears not to look the truth in the face," said the
huntsman. "He told me things that only I say to myself, because the rest are
too tender to say them. Doctor looks them, but even he won't say them out.
But master could tell me I'd soon be gone. He believes in the next world,
and don't see no reason in the nature of things why there shouldn't be fox-
hunting there."

Another visitor dropped in upon Mr. Withycombe. It was Arthur Chaffe

in his Sunday black.

"If one's enough at a time, I'll be off," he said, "and fetch up again next
Sunday."

But Enoch welcomed him.

"I'm in good fettle, Arthur, and be very willing to make hay while the
sun shines."

Arthur, however, doubted.

"You'm looking so grim as a ghost, my old dear," he answered, "and so

white as a dog's tooth."

Mr. Withycombe laughed.

"You be a cheerful one for a death-bed, sure enough," he answered.

"There's no death, Enoch, and you know it so well as what I do."

"And you an undertaker! Mind you deal fair and square with me,
Chaffe; for death, or no death, 'tis as certain as life that I shall want some of
your best seasoned elm afore very long."

But Mr. Chaffe steadied the conversation.

"You be quiet, Enoch," he said. "This is the Lord's Day and us didn't
ought to be joking, like as if 'twas Monday."

The hunter took up the challenge and they went at it again, in the best of
humour, till Melinda returned and gave the three men tea.
 They spoke of Dinah and gave examples of her quality and difference
from other young women. Mrs. Honeysett tended rather to disparage her of
late, having been influenced thereto in certain quarters; but Arthur Chaffe
supported Dinah, and Lawrence listened.

He presently, however, quoted.

"Long ago, before she had to break with poor Bamsey, I remember a
word she said to me," he remarked. "It showed she knew a bit about human
nature and was finding out that everybody couldn't be relied upon. She
asked me if I was faithful. It seemed a curious question at the time."

"And you said you was, no doubt?" asked Melinda.

"We must all be faithful," declared Arthur Chaffe. "Where there's no

faith, there's no progress, and the order of things would run down like a
clock."

"The world goes round on trust," admitted Mr. Withycombe, "and the
more man can trust man, the easier we advance and the quicker. 'Faithful' be
the word used between us in business and it wasn't the one we fixed upon
for nothing. 'Yours faithfully' we say."

"Yes, oftener than we mean it, God forgive us," sighed Mr. Chaffe. "'Tis
often only a word and too few respect it. Us have all written so to people we
hate, and would like to think was going to be found dead in their beds to-
morrow. Such is the weakness of human nature."

"We must be civil even to enemies," said the sick man.

"I wonder," mused Melinda. "It's a bit mean to hide our feelings so
much."

"Warner Chave was a fine example," answered Mr. Chaffe. "Foes he

had a plenty, as such a straight and pushing chap must; but he never
quarrelled with man or mouse. He never gave any living soul a straw to
catch hold of. His simple rule was that it takes two to a quarrel, and he'd
never be one; and he never was. Why! He got on with his relations even!"
 "How?" asked Maynard.

"Never criticised 'em. Such was his amazing skill that he let them live
their lives their own way, and treated 'em with just the same respect he
showed to everybody else."

They enjoyed tea in a cheerful temper, and Arthur Chaffe had

continually to remind them it was Sunday.

Then he prepared to depart and Maynard left with him. In the high road
they, too, separated, for their ways were opposite.

"I laugh, but with sorrow in my heart," said Arthur, "for that dear man
be going down the hill terrible fast to the experienced eye. We shall miss
him—there's a lot of Christian charity to him, and I only wish to God he'd
got the true Light. That's all he wants. The heart be there and the ideas; but
his soul just misses the one thing needful."

"I hope not," said Maynard. "He's earned the best we can wish for."

"It may come yet," prophesied Arthur. "It may flash in upon him at the
last. Where there's life, there's hope of salvation. Us must never forget that
the prayers of a righteous man availeth much, Maynard."

"And the life of a righteous man availeth more, Mr. Chaffe," answered
Lawrence.

"That we ain't told," replied the elder. "We can only leave the doubter to
the mercy of his Maker; and there's many and many got to be left like that,
for doubt's growing, worse luck. Us say 'sure and certain hope' over a lot of
mortal dust, when too well our intellects tell us the hope ban't so certain nor
yet sure as us would like to feel."

He perked away on his long, thin legs, like a friendly stork, and
Maynard set his face upward for his home.
 CHAPTER XVII

DINAH

Though circumstances had of late baffled Dinah Waycott and tended

sometimes to beget a reserve and caution foreign to her; though she found
herself hiding her thoughts in a manner very unfamiliar and keeping silent,
where of old she would have spoken, or even allowing by default an
opinion to pass unquestioned as hers which of old she would have
contradicted; there was still no confusion in her mind when she communed
with herself. Therefore, when she found that she stood face to face with a
new thing, she pretended no doubt as to the name of it. Bewilderment, none
the less, filled her mind, and elements of joy, that might be supposed proper
to such an experience, could not at present live with the other more
distracting sensations her discovery awakened. Something like dismay she
did feel, that any such paramount event should have overtaken her at this
stage in her life; for Dinah was not insensitive, though so plain-spoken, and
now painfully she felt this was no time to have developed the burning
preoccupation that already swept into nothingness every adventure and
emotion of the past.

There had happened a precious wonder beyond all wonders, but Dinah
felt angry with herself that, under present conditions of stress and anxiety,
any loophole existed for such a selfish passion. It had come, however, and it
could not stand still; and selfish she had to be, since the good and glory of
the thing must be shared with none at present.

Silent, however, she could not be for long. There was one to whom she
never feared to talk and from whom she had no secrets. To him, her foster-
father, Dinah had taken every joy and sorrow, hope and fear since she could
talk. Only once, and that in the matter of his own son, John, had she hidden
her heart from Ben Bamsey, yet found it possible to show it to another.
 She remembered that now; and it was that same 'other,' who, from the
first, had possessed a nameless quality to challenge and arrest Dinah.
Gradually he had occupied a larger and larger domain in her mind, until he
overwhelmed it and her gradual revelation was complete. For gradual it had
been. Together they walked once more at her wish, after their first long
tramp, while, agreeably to the invitation of Mr. Bamsey, Lawrence Maynard
again visited Green Hayes upon a Sunday afternoon. Then, indeed, under
the eyes of Jane and her mother, Dinah had hidden her heart very
effectually, and even made occasion to leave the house and go elsewhere
before Maynard's visit was ended; but she knew by signs in her body and
soul that she was in love. The amazing novelty of her thoughts, the
transfiguration they created in her outlook upon all things, the new colours
they imparted to any vision of the future, convinced her that there could be
no doubt. Against this reality, the past looked unreal; before this immensity,
the past appeared, dwarfed and futile. That cloudy thing, her whole
previous existence, was now reduced to a mere huddled background—its
only excuse the rainbow that had suddenly glowed out upon it.

She was honestly ashamed that love could have happened to her at this
moment and thrust so abruptly in upon her sad experience with Johnny. It
seemed, in some moods, callous and ungenerous to allow such wayward
delights and dreams to enter her heart while well she knew that his was
heavy. But, at other times, she would not blame herself, for her conscience
was clear. Maynard had meant nothing to her when she gave up her first
lover, and it was no thought of him, or any man, that had determined her to
do so.

Her love at least was pure as love well could be, for she did not know
that he returned it; sometimes, at first, she almost hoped he would not. But
that was only in the dim and glimmering dawn of it. Love cannot feed on
dreams alone. She put it from her at first, only to find it fly back. So she
nursed it secretly and waited and wondered, and, meantime, strove to find a
way to leave Green Hayes. But still Ben opposed her suggestions, and then
there came a time when, from the first immature fancy that to love him
secretly, herself unloved, would be enough, Dinah woke into a passionate
desire that he should love her back again. Now she was mature,
accomplished, awake and alert, lightning quick to read his mood, the
inflexion of every word he uttered when he was beside her, the faintest
brightening of his eyes, his dress, his walk, the inspiration of every
moment.

She could not help it. Often she returned dull and daunted, not with him
but herself; and as she began to know, from no sign of his but by her own
quickened sex endowment that he cared for her, she grew faint and ashamed
again. He had taught her a great deal. He seemed to be very wise and
patient, but not particularly happy—rather unfinished even on some sides of
his experience. There were a great many things he did not know, and he
seemed not nearly as interested in life as she was, or as desirous to have it
more abundantly. Johnny had evinced a much keener appetite for living and
far greater future ambitions than Maynard. Lawrence was, in fact, as
somebody had said, "a twilight sort of man." But it was a cool, clear, self-
contained twilight that he moved in, and he appeared to see distinctly
enough through it. Dinah thought it was twilight of morning rather than
night. She imagined him presently emerging into a wonderful dawn, and
dreamed of helping him to do so. She checked such fancies, yet they were
natural to her direct temperament, and they recurred with increasing force.
Her native freedom of mind broke down all barriers to private thinking, and
sometimes she longed for him; then she chastened herself and planned a
future without him and found it not worth remaining alive for. She began to
sleep ill, but hid the signs. She plotted to see Maynard and was also skilful
to conceal the fact that she did so. He always welcomed her, sometimes
with a merry word, sometimes with a sad one. The milch cows grazed upon
the moor now, and once or twice, sighting them a mile off upon her way
home, Dinah would creep near and wait for Lawrence and the sheep dog to
round them up and turn them to the valley for milking. She would hide in a
thicket, or behind a boulder, and if he came would get a few precious
words; but if Neddy Tutt appeared, as sometimes happened, then she would
lie hid and go her way when he was gone.

She knew now that Maynard cared for her; but she discounted his every
word and granted herself the very minimum. She was fearful of hoping too
much, yet could not, for love's sake, hope too little. She longed to set her
mind at rest upon the vital question; and at last did so. Making all
allowance, and striving to chill and belittle his every word, she still could
not longer doubt. He was often difficult to understand, yet some things she
did now clearly comprehend. She had already seen a man in love, and
though the love-making of Johnny differed very widely from that of
Lawrence, though indeed Lawrence never had made a shadow of love to
her, yet she knew at last, by mental and physical signs that curiously
repeated Johnny's, he did love her.

She hugged this to her heart and felt that nothing else mattered, or
would ever matter. For a time she even returned to her first dream and
assured herself that love was enough. He might tell her some day; he might
never tell her; but she knew it, and whether they came together, or lived
their lives apart, the great fact would remain. Yet there was no food in any
such conclusion, no life, no fertility, no peace.

She came to Ben Bamsey at this stage of her romance, for she hungered
and thirsted to tell it; and to her it seemed that her foster-father ought to
know. She came to him fresh from a meeting with Lawrence, for she had
been, at Mr. Bamsey's wish, with a message to Falcon Farm, and she had
met Maynard afterwards as she returned over the foothills of the Beacon.

The year was swinging round, and again the time had come for scything
the fern, that it might ripen presently for the cattle byres.

He stopped a moment and shook hands with her.

"Just been up to see Soosie-Toosie," said Dinah. "Terrible sorry Mr.

Palk's cut his hand so bad."

"Yes; it'll have to go in a sling for a bit. He thought it would mend and
didn't take no great count of it, and now it's festered and will be a fortnight
before it's all right."

"I wish I could help," she said. "If you was to do his work and Mr.
Stockman would let me come and milk the cows for a week——"

"No, no—no need for any help. Tom can do a lot. It's only his left hand
and master's turning to. He says if he can't do the work of Tom's left hand,
it's a shame to him."
 "Did Mr. Palk get his rise he was after?"

"He did not, Dinah. But Mr. Stockman put it in a very nice way. He's
going to raise us both next year. And you? Nothing turned up?"

She shook her head.

"A funny thing among 'em all they can't find just the right work. I wish
you was away from Green Hayes."

She had told him all about her difficulties and he appreciated them. He
thought a great deal about Dinah now, but still more about himself. He had
been considering her when she appeared; and for the moment he did not
want to see her. His mind ebbed and flowed, where Dinah was concerned,
and he was stubborn with himself and would not admit anything. He
persisted in this attitude, but now he began to perceive it was impossible
much longer to do so. If Dinah had read him, he also had read her, for she
was not difficult to read and lacked some of the ordinary armour of a
woman in love with a man. He knew time could not stand still for either of
them, yet strove to suspend it. Sometimes he was gentle and sometimes he
was abrupt and ungenial when they met. To-day he dismissed her.

"Don't you bide here now," he said. "I'm busy, Dinah, and I've got a
good bit on my mind too."

"I'm sorry then. You ask Soosie if I shall come and milk. That would
give you more time. Good morning, Lawrence."

He had seen how her face fell.

"I wish I could think of a way out for you. Perhaps I shall. I do have it
on my mind," he said. "But there's difficulties in a small place like this. Pity
you ain't farther off, where you could breathe easier."

For some reason this remark cheered her. She left him without speaking
again and considered his saying all the way home. The interpretation she
put upon it was not wholly mistaken, yet it might have surprised the man,
for we often utter a thought impelled thereto by subconscious motives we
hardly feel ourselves. He did not for the moment associate himself, or his
interests, with the desire that Dinah should go away, yet such a desire really
existed in him, though, had he analysed it, he had been divided between two
reasons for such a desire. He might have asked himself whether he wished
her out of her present difficult environment in order that his own approach
to her should become easier and freer of doubtful interpretation in the
mouths of other people; or he might have considered whether, for his own
peace, he honestly wished to see Dinah so far away that reasonable excuses
should exist for dropping her acquaintance. Between these alternatives he
could hardly have decided at present. He lagged behind her, for love seldom
wakens simultaneously, or moves with equal pace on both sides. He might
continue to lag and fall farther behind, or he might catch her and pass her.
He was at a stage in their approach when he could still dispassionately
consider all that increase of friendship must imply. He hardly knew where
the friendship exactly stood at the moment. Actual irritation sometimes
intervened. He suffered fits of impatience both with himself and her. Yet he
knew, when cool again, that neither was to be blamed. If blame existed, it
was not Dinah's.

She went home now, and after dinner on that day, found opportunity to
speak with her foster-father. They were cutting oats and she descended to
the valley field beside Ben and made a clean breast of her secrets, only to
find they were not hidden from him. He treated her as one much younger
than she really was, and seeing that she was indeed younger than her age in
many particulars of mind, this process always satisfied Dinah and made her
feel happier with Ben Bamsey than his family, who made no such
concession, but, on the contrary, attributed qualities to Dinah she lacked.

"Foster-father," she said, "I'm wishful to have a tell and here's a good
chance. I be getting in a proper mizmaze I do assure 'e."

"You must be patient, my little dear," he answered.

"I've been patient for six months, though it's more like six years since I
changed about poor Johnny. And other people, so well as I, do feel I'd be
better away."
 "Have I ever said you wouldn't be better away, Dinah? I know only too
well how it is. But a father can look deeper into life than his child. I'm wide
awake—watching. I understand your troubles and try to lessen 'em where I
can."

"If you wasn't here, I'd have runned away long ago. For a little bit, after
that cruel come-along-of-it, I wouldn't have minded to die. Now that's
passed; but you, who never did such a thing, can't tell what it is to know
that you're fretting and galling two other women. And Mrs. Bamsey and
Jane have a right to be fretted and galled by me. I can well understand,
without their looks, how I must be to them; and 'tis a sharp thorn in your
flesh to be hated, and it's making me miserable."

He had not guessed she much felt this side of the position.

"You'm growing up, I see, like everybody else," he said. "I forget that I
can't have it both ways, and can't have you a loving, watchful daughter and
a child too. And if you can think for me, as you do so wonderful, then
you'm old enough to feel for yourself, of course. Still you'm so parlous
young in some ways, that it ain't strange I still think of you a child in
everyway. I suppose you must go and I mustn't find nothing against no
more. And yet——"

He broke off, his mind upon Maynard.

While he was hesitating and wondering whether he should name the

man, Dinah saved him the trouble.

"Only this morning coming home from Falcon Farm I met Lawrence—
Lawrence Maynard and he—even he, an outsider so to say, said he thought
I'd be better far ways off. And I well know it. I didn't ought to be breathing
the same air as Johnny. It ain't fair to him, especially when you know he's
not taking it just like I meant it. And I wouldn't say it's right, foster-father."

He, however, was more concerned for the moment with the other man
than his own son.
 "Johnny's beginning to understand. His good sense will come to help
him," he answered; "but when you say 'Lawrence Maynard,' Dinah—what
do you say? Why for has he troubled his head about your affairs?"

"You like him?" she answered.

"Granted. And so do you seemingly. And how much do you like him?
Do you like him as much as I think you do, Dinah?"

She was astonished but pleased.

"I'm glad you ask me that; but I hope Mrs. Bamsey and Jane——?"

"So do I. No, they haven't marked nothing; or if they have, they've hid it
from me very close. But Faith wouldn't hide nothing. Tell me."

She hesitated.

"What do you think?" she asked.

"I think you care about the man."

"I love him then."

"Ah!"

"It sounds a fearful thing spoke out naked. But truth's truth, and I'm very
thankful to tell you. Don't you call it wicked nor nothing like that. It only
happened a very little while—not till long, long after I dropped Johnny. But
it has happened; and now I know I never loved dear Johnny a morsel."

He reflected.

"The man himself told you to go—Maynard, I mean? What was in his
mind when he said that?"

"I've been wondering. It ought to have made me sad; but it hasn't. Ought
it to have made me sad?"
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