Chapter 14 - Investments Flashcards

1
Q

why do companies invest in other companies?

A

to earn a high rate of return, the exercise control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

debt securities represent…

A

a creditor relationship with another entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

trading is held for sale in…

A

the near term to generate capital gains

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

ONLY ______ securities can be classified as held to maturity

A

debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

HTM securities do not…

A

increase the volatility of RE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

bonds purchased at discount journal entry

A

dr: investment in HTM
cr: cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Trade securities fair value adjustment entry

A

dr: fair value adjustment (TS)
cr: unrealized holding gain (I/S)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

AFS adjusting journal entry

A

dr: fair value adjustment (AFS)
cr: unrealized holding gains (OCI)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

accounting treatment for less than 20%

A

fair value method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

treatment for between 20% and 50%

A

equity method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

treatment for more than 50%

A

consolidation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

acquisition of common stock FV method journal entry

A

dr: investment in ____
cr: cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

acquisition of common stock equity method journal entry

A

dr: investment in ____
cr: cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

dividends declared and paid journal entry FV method

A

dr: cash (# of divs * per share cash)
cr: dividend revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

dividends declared and paid journal entry equity method

A

dr: cash
cr: investment in ____

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

reporting net income journal entry Fv method

A

NONE

17
Q

reporting net income journal entry equity method

A

dr: investment in _____ (% times NI)
cr: investment income

18
Q

fair value per share journal entry Fv method

A

dr: fair value adjustment (price per share * # of shares - cost)
cr: unrealized holding gain

19
Q

fair value per share journal entry equity method

A

NONE

20
Q

what securities go to OCI?

A

available-for-sale

21
Q

where are impairment losses on the income statement?

A

other operating expenses

22
Q

average accum expenditures is an

A

approximation