Chapter 9 Flashcards
Investments in shares may be acquired on margin. This means that the investor pays only part of the purchase price to acquire the shares. The rest is financed by the broker. Since the shares legally belong to the investor, the asset is recorded at the full share price and a liability to the broker for the amount that was financed is also recognized.
To record the investment:
DR. Inv’t in equity securities 38,750
CR.Cash(($37,000*50%)+$1,750) 20,250
CR.Payable to broker 18,500
What are….?
Short-term, unsecured, discounted, and negotiable notes sold by one company to another in order to satisfy immediate cash needs
commercial paper
When the cost model is applied to an investment in debt securities, such as bonds, it is referred to as the…
amortized cost model.
Under the cost/amortized cost model, holding gains are
……….
recognized in net income only when realized.
Application of the cost model to the investment one company makes in another entity’s shares is straightforward and includes all of the following except:
Unless impaired, report the investment at its fair value at each balance sheet date.
Where are the holding gains under the fair value through net income model recognized?
in net income only
The fair value through net income model requires that…
investments are measured at fair value and transaction costs are expensed.
Under the fair value through other comprehensive income model, unrealized gains and losses are
recognized in other comprehensive income.
Realized gains and losses on investment disposals are recognized in net income for all investment instruments except those classified as:
FV-OCI without recycling.
Assuming the revised amount and timing of cash flows for an investment can be reasonably determined, the incurred loss impairment model uses which discount rate?
either the historical rate or the current market rate
Assuming the revised amount and timing of cash flows for an investment can be reasonably determined, the expected loss impairment model uses which discount rate?
the historical interest rate
What model calculates the impairment loss as the difference between the asset’s fair value and its current carrying amount.
the fair value loss impairment model
What are the differences in the disclosure requirements for investments in associates under IFRS and ASPE?
ASPE allows the use of methods other than the equity method.
securities
In general, any evidence of
an interest in corporate stock or stock rights or
an interest in any note, bond, debenture or other evidence of indebtedness issued by a government or corporation.
For certain tax purposes, however, the definition is more limited.
FV-OCI without recycling?
= Realized gains and losses on investment disposals are not recognized in net income
