CHAPTER 12

Question 1

equity securities

Answer 1

purchased by individual investors, mutual funds, and corporations
- used to earn a return from the dividends/interest the securities pay or from increases in the market prices of the securities

Question 2

life of an investment

Answer 2

purchase inventory

recognize investment revenue
debt: interest
equity: dividends

unrealized gains and losses

sell the investment

Question 3

held to maturity (htm)

Answer 3

investor has the “positive intent and ability” to hold the securities to maturity

Question 4

trading securities (ts)

Answer 4

investments in debt or equity securities acquired principally to sell them in the near term

Question 5

securities available-for-sale (afs)

Answer 5

investment that is acquired by a company neither for an active trading account nor to be held to maturity

Question 6

other-than-temporary impairments (ott)

Answer 6

declines or increases in the fair values of some investments are always reported in earnings

Question 7

significant influence

Answer 7

assumed to exist IF the investor owns between 20-50% of the investee’s voting shares

Question 8

equity method

Answer 8

views the investor and the investee collectively as a special type of SINGLE ENTITY

Question 9

INVESTMENT ACCOUNT =

Answer 9

OG. COST + INV. SHARE OF NET INCOME - PORTION OF THE EARINGS RECEIVED AS DIVIDENDS

Question 10

derivatives

Answer 10

investments that “derive” their values from some other security or index