CH. 3 - Investments in Debt & Equity Securities

Question 1

General Accounting Treatment for stock investments not measured at Fair Value.

Answer 1

Less than 20%

• No Significant Influence
• Adjusted Cost Method (Cost - Impairment Loss)

20% - 50%

• Significant Influence
• Equity Method

Greater than 50%

• Controlling Interest
• Consolidation

Question 2

Trading Securities (Debt Securities Overview)

Answer 2

B/S
Usually Current
FMV

I/S
Unrealized Gain/Loss
Realized Gain/Loss
Interest Income

Cash Flows
Usually Operating Activity
(purchase sale)

Question 3

Available for Sale (AFS)

Answer 3

B/S
Current/Non-Current
FMV
Unrealized Gains/Losses on OCI on Statement of Comprehensive Income & Accum on B/S in Stockholders Equity as Accum OCI

I/S
Realized Gain/Loss
Interest Income

Cash Flows
Investing Activity

Question 4

Held-To-Maturity (HTM)

Answer 4

B/S
Non-Current (Current)
Amortized Cost

I/S
Realized Gain/Loss
Interest Income

Cash Flows
Investing Activity