Ch 4 marketable securities

Question 0

Trading securities

Answer 0

-Buying & selling within short period of time
-When acquired recorded at cost, they are a form of inventory so transactions are reported in operating activities
-Current assets on balance sheet
Include both debt (bonds) & equity (stock)
-adjustments to fair value are made on a continuous basis:
Unrealized gains/losses (temporary) appear on the income statement
Realized gains/losses are always on the income statement along with interest and dividend income
-acquisition/disposal is normal operating activity

Question 1

Marketable securities

Answer 1

When an investment is made in securities (debt or equity) that are publicly traded and the investment is not large enough to provide the investor with any significant influence over the investee then use marketable securities

Trading
Available for sale
Held to maturity

Question 2

Available for sale Securities

Answer 2

changes in market price are reflected on the balance sheet on a continuous basis. Are not inventory . Purchases and sales are reported in investing activities. Fluctuations in price are not reported in net income until securities are sold. Instead record it in comprehensive income and directly on stockholders equity immediately below retained earnings in accumulated other comprehensive income.

Realized gains/losses are always on the incom statement as well as interest and dividend income.
Aqc & disposal of AFS is an investing activity on the stmt of cash flows

Question 3

HFT

Answer 3

BS- current only debt/equity FMV
IS- unrealized gains/losses , realized gains/losses. Interest & dividend income
Cash flow- operating activity could be investing if non-current

Question 4

AFS

Answer 4

BS- current/non-current. Debt/equity FMV …unrealized gains/losses on BS as part of comprehensive income

IS- impairments , realized gains/loss
Interest & dividend income

Cash flow- investing activity