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 ____
reporting net income journal entry Fv method
NONE
reporting net income journal entry equity method
dr: investment in _____ (% times NI)
cr: investment income
fair value per share journal entry Fv method
dr: fair value adjustment (price per share * # of shares - cost)
cr: unrealized holding gain
fair value per share journal entry equity method
NONE
what securities go to OCI?
available-for-sale
where are impairment losses on the income statement?
other operating expenses
average accum expenditures is an
approximation
