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jeremy harmon > Chapter 10 Financial Accounting > Flashcards

Chapter 10 Financial Accounting Flashcards

1
Q

Investor

A

Entity that owns stock of a corporation

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2
Q

Investee

A

Corporation that issued the stock

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3
Q

Shorts Term Investments

A

Must be liquid

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4
Q

Long Term Investments

A

Expected to be held longer than one year

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5
Q

What are 2 characteristics of Available for Sale Investments?

A

Initially recorded at cost

Reported at market value on the balance sheet

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6
Q

In terms of valuing investments, what happens when you increase in market value?

A

Unrealized Gain

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7
Q

In terms of valuing investments, what happens when you decrease in market value?

A

Unrealized Loss

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8
Q

What is the companion account to Long Term Investments?

A

Allowance to Adjust Investment to Market

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9
Q

Debit Balance =

A

Cost is greater then market

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10
Q

Credit Balance =

A

Market is less than cost

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11
Q

What does AFS stand for?

A

Available for Sale

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12
Q

What does not impact net income?

A

Unrealized gains or losses on available for sales investments

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13
Q

What accounting method to do use when the investor owns up to 20%?

A

Available for Sale

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14
Q

What accounting method to do use when the investor owns 20%-50%?

A

Equity Method

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15
Q

What accounting method to do use when the investor more than 50%?

A

Consolidation

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16
Q

What are 4 characteristics of the Equity Method?

A

Investor has significant influence over the investee
-Investment is recorded at cost
Investment is increased by investee earnings
Investment is decreased by investee dividends

17
Q

What are the 2 debits to the Long Term Investment Account?

A

Original Cost

Share of Net Income

18
Q

What is 1 credit on the Long Term Investment account?

A

Share of Dividends

19
Q

In terms of consolidated subsidiaries, an investor is called?

A

Parent company

20
Q

In terms of consolidated subsidiaries, an investee is called?

A

A subsidiary

21
Q

Financial statements of a parent and its subsidiaries are…

A

Consolidated as if they were one company

22
Q

What are 2 characteristics of Minority Interest?

A

Recorded in consolidation process and be included in liabilities
- Occurs when parent owns less than 100% of subsidiary

23
Q

What does sub stand for?

A

Subsidiary

24
Q

What are 2 characteristics of Long Term Bond Investments?

A

Called held to maturity investments

Reported at amortized cost

25
Q

Held to Maturity Investments

A

Fixed and set maturity rate

26
Q

What does Consolidation in Foreign Subsidiaries result in?

A

Results in foreign currency translation adjustment

jeremy harmon (108 decks)

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