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Ch15 Investments

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Thông tin cơ bản

Tiêu đề Investments
Trường học Standard University
Chuyên ngành Accounting
Thể loại Chương
Năm xuất bản 2023
Thành phố Standard City
Định dạng
Số trang 36
Dung lượng 756 KB

Nội dung

 These debt securities and equity securities are termed Investments , or Temporary Investments , and are reported in the Current Assets section of the balance sheet..  Long-term[r]

(1)

Investments

(2)

Accounting for Investment Securities Bonds and notes (Debt securities) Bonds and notes (Debt securities) Common and preferred stock (Equity (Equity securities) securities) Common and preferred stock (Equity (Equity securities) securities)

Investments can be accounted for in a variety of ways, depending on the nature

(3)

Investing

 These debt securities and equity securities are termed Investments, or Temporary Investments, and are reported in the Current Assets section of the balance sheet

 Long-term investments often involve the

purchase of a significant portion of the stock of another company and are reported in

(4)

Learning Objectives

Demonstrate how to identify and account for investments classified for reporting purposes

(5)(6)

Learning Objectives

Demonstrate how to identify and account for investments classified for reporting purposes

(7)

Trading Securities

Adjustments to fair

Adjustments to fair

value are recorded

value are recorded

as:

as:

1.

1. a direct adjustment to a direct adjustment to

the investment

the investment

account, and

account, and 2.

2. a Unrealized holding a Unrealized holding

gain/loss on the

gain/loss on the

Income Statement Income Statement

Adjustments to fair

Adjustments to fair

value are recorded

value are recorded

as:

as:

1.

1. a direct adjustment to a direct adjustment to the investment

the investment account, and account, and 2.

2. a Unrealized holding a Unrealized holding gain/loss on the

(8)

Trading Securities

Matrix, Inc purchased the addition securities classified

Matrix, Inc purchased the addition securities classified

as Trading Securities (TS) in 2006 The fair value

as Trading Securities (TS) in 2006 The fair value

amounts were determined on December 31, 2006

amounts were determined on December 31, 2006

Prepare the journal entries for Matrix, Inc to adjust

Prepare the journal entries for Matrix, Inc to adjust

the securities to fair value at 12/31/06

the securities to fair value at 12/31/06

Matrix, Inc purchased the addition securities classified Matrix, Inc purchased the addition securities classified

as Trading Securities (TS) in 2006 The fair value as Trading Securities (TS) in 2006 The fair value amounts were determined on December 31, 2006 amounts were determined on December 31, 2006 Prepare the journal entries for Matrix, Inc to adjust Prepare the journal entries for Matrix, Inc to adjust

(9)

Trading Securities

The Net Unrealized Holding Loss is reported on the Income Statement.

(10)

Trading Securities

Unrealized holding gains and losses from

trading securities

are reported on the

(11)

Learning Objectives

Demonstrate how to identify and account for investments classified for reporting purposes

(12)

Securities Available-for-Sale

Adjustments to fair value

Adjustments to fair value

are recorded as:

are recorded as:

1.

1. a direct adjustment to the a direct adjustment to the

investment account, and

investment account, and 2.

2. an allowance account in an allowance account in

the equity section of the

the equity section of the

balance sheet called

balance sheet called

Unrealized Holding Unrealized Holding Gains/Losses

Gains/Losses”.”.

Adjustments to fair value

Adjustments to fair value

are recorded as:

are recorded as:

1.

1. a direct adjustment to the a direct adjustment to the investment account, and investment account, and 2.

2. an allowance account in an allowance account in the equity section of the

the equity section of the

balance sheet called

balance sheet called

Unrealized Holding Unrealized Holding Gains/Losses

(13)

Securities Available for Sale Example

Matrix, Inc purchased the securities listed below in

Matrix, Inc purchased the securities listed below in

2006 They are classified as Securities Available

2006 They are classified as Securities Available

for Sale (SAS) The fair value of the securities

for Sale (SAS) The fair value of the securities

were determined on December 31, 2006 Prepare

were determined on December 31, 2006 Prepare

the journal entries for Matrix, Inc to adjust the

the journal entries for Matrix, Inc to adjust the

securities to fair value at December 31, 2006

securities to fair value at December 31, 2006 Matrix, Inc purchased the securities listed below in

Matrix, Inc purchased the securities listed below in

2006 They are classified as Securities Available

2006 They are classified as Securities Available

for Sale (SAS) The fair value of the securities

for Sale (SAS) The fair value of the securities

were determined on December 31, 2006 Prepare

were determined on December 31, 2006 Prepare

the journal entries for Matrix, Inc to adjust the

the journal entries for Matrix, Inc to adjust the

securities to fair value at December 31, 2006

(14)

Securities Available for Sale Example

This net unrealized holding gain is reported in the equity section of the

balance sheet.

This net unrealized holding gain is reported in the equity section of the

(15)

Securities Available for Sale

Accumulated other comprehensive income from securities available-for-sale

(16)

Learning Objectives

Demonstrate how to identify and account for investments classified for reporting purposes

(17)

Held To Maturity Securities Example

Matrix, Inc purchased the securities listed below in

Matrix, Inc purchased the securities listed below in

2006 They are classified as Held to Maturity

2006 They are classified as Held to Maturity

Securities (HTM) The fair value of the securities

Securities (HTM) The fair value of the securities

were determined on December 31, 2006 Prepare

were determined on December 31, 2006 Prepare

the journal entries for Matrix, Inc to adjust the

the journal entries for Matrix, Inc to adjust the

securities to fair value at December 31, 2006

securities to fair value at December 31, 2006 Matrix, Inc purchased the securities listed below in

Matrix, Inc purchased the securities listed below in

2006 They are classified as Held to Maturity

2006 They are classified as Held to Maturity

Securities (HTM) The fair value of the securities

Securities (HTM) The fair value of the securities

were determined on December 31, 2006 Prepare

were determined on December 31, 2006 Prepare

the journal entries for Matrix, Inc to adjust the

the journal entries for Matrix, Inc to adjust the

securities to fair value at December 31, 2006

(18)

Held To Maturity Securities

Never adjustment to fair

Never adjustment to fair

value

value

Never adjustment to fair

Never adjustment to fair

value

(19)

Learning Objectives

(20)

Purchase of Bonds

Homer Company purchases $18,000 of U.S Treasury bonds direct from a Federal Reserve Bank at their par value on

March 17, 2012, plus accrued interest for 45 days The bonds have an interest rate of 6%, payable on July 31 and January 31, 2012

(21)

Interest Revenue

On July 31, Homer Company receives a semiannual interest payment of $540 ($18,000 ì 6% ì 1ẵ) The $540 interest includes $135 of accrued interest that Homer Company purchased with the bonds on March 17

(22)

Interest Revenue

Homer Company’s accounting period ends on December 31 Thus, an adjusting entry must be made to accrue

interest for five months The following adjusting entry records the accrued interest:

(23)

Interest Revenue

Homer Company receives interest of $540 on January 31, 2013 Notice that Interest Receivable is credited for $450 to reflect that this amount is a receivable from

(24)

Purchase of Stock

(25)

Receipt of Dividends

On July 31, Bart Company receives a dividend of $0.40 per share from Lisa Company

Dividend Revenue is reported as part of Other Income

(26)

The gain is reported as part of Other income on Bart Company’s income statement.

Sale of Stock

(27)

Learning Objectives

Explain what constitutes significant influence by the investor over the operating and financial

(28)(29)

Reporting Categories for Investments

The equity method is used for investments in

equity securities

resulting in significant influence (20%-50%) The equity method is used for investments in

equity securities

resulting in significant influence (20%-50%)

The cost method is used for investments in equity

securities when

significant influence is not present.

The cost method is used for investments in equity

securities when

significant influence is

not present.

When an investment results

When an investment results

in the

in the controlcontrol of the investee of the investee (generally

(generally > 50> 50%), the %), the subsidiary is

subsidiary is consolidatedconsolidated with the parent company.

with the parent company

When an investment results When an investment results in the

in the controlcontrol of the investee of the investee (generally

(generally > 50> 50%), the %), the subsidiary is

(30)

Learning Objectives

(31)

Equity Method

1. The investment account is increased increased

by:

Original investment cost.

Proportionate share of investee's

earnings.

2. The investment account is

decreased

decreased by:

Dividends received.

1. The investment account is increased increased

by:

Original investment cost.

Proportionate share of investee's

earnings.

2. The investment account is

decreased

decreased by:

(32)

Equity Method

On January 1, 2006, Matrix, Inc acquired 45% of the equity securities of Apex, Inc for

$1,350,000 On the acquisition date, Apex’s net assets had a fair value of $3,000,000 During

2006, Apex cash paid dividends of $150,000 and reported net income of $1,750,000 What amount will Matrix, Inc report on the

balance sheet as Investment in Apex, Inc.? On January 1, 2006, Matrix, Inc acquired 45% of

the equity securities of Apex, Inc for

$1,350,000 On the acquisition date, Apex’s net assets had a fair value of $3,000,000 During

2006, Apex cash paid dividends of $150,000 and reported net income of $1,750,000

(33)(34)(35)

Equity Method

Investment in Apex, Inc.

Investment 1,350,000 67,500 45% Dividends 45% Earnings 787,500

Reported amount 2,070,000

If the subsidiary had a loss, the investment account would have

(36)

End of Chapter 15

Homework

Read the textbook

Do all examples in text book

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