Chapter 14 - Investments Flashcards
why do companies invest in other companies?
to earn a high rate of return, the exercise control
debt securities represent…
a creditor relationship with another entity
trading is held for sale in…
the near term to generate capital gains
ONLY ______ securities can be classified as held to maturity
debt
HTM securities do not…
increase the volatility of RE
bonds purchased at discount journal entry
dr: investment in HTM
cr: cash
Trade securities fair value adjustment entry
dr: fair value adjustment (TS)
cr: unrealized holding gain (I/S)
AFS adjusting journal entry
dr: fair value adjustment (AFS)
cr: unrealized holding gains (OCI)
accounting treatment for less than 20%
fair value method
treatment for between 20% and 50%
equity method
treatment for more than 50%
consolidation
acquisition of common stock FV method journal entry
dr: investment in ____
cr: cash
acquisition of common stock equity method journal entry
dr: investment in ____
cr: cash
dividends declared and paid journal entry FV method
dr: cash (# of divs * per share cash)
cr: dividend revenue
dividends declared and paid journal entry equity method
dr: cash
cr: investment in ____
