definitions Flashcards
long term investments
are
investments that are not readily convertible to cash or are not
intended to be converted into cash in the short term.
investments in securities include both ______ and _____ securities.
debt and equity
define debt securities
reflect a creditor relation such as investments in notes, bonds, and
certificates of deposit; they are issued by governments, companies,
and individuals.
define equity securities
reflect an owner relation such as
investments in shares of stock issued by companies.
accounting for investment in securities depend on what 3 factors
- security type
- The company intent to hold the securities either short-term or long-term.
- the investor’s % of ownership in the other company’s equity securities
trading securities
debt investments that the company actively buys and sells for profit.
are trading securities current or non current asset?
current asset
are long term investments current or non current assets
non current
profilio
group of securities
Is managerial accounting used by internal or external users?
Internal users
short term investment
investment intended to be converted to cash in one year. Mature within 3-12 months.
Are short investments current or non current assets?
Current assets.
what journal entries are recorded when purchasing a bond?
Dr. Debt Investment
Cr. Cash
Assume that Long Co. paid 30,000 on July 1 2021 to buy Dell 7% Two-year bonds payable with a $30,0000 par value. The bond’s interest is paid semiannually on dec. 31 and June 30. What is the journal entry for the acquisition?
Dr. debt investment 30,000
Cr. cash 30,000
Assume that Long Co. paid 30,000 on July 1 2021 to buy Dell 7% Two-year bonds payable with a $30,0000 par value. The bond’s interest is paid semiannually on Dec. 31 and June 30. What is the journal entry for the Cash receipt of interest for 12/31/24
Dr.Cash. 1050
Cr. Interest Revenue 1050
30,000 X 7%/ 2= 1050
how do you calculate for interest?
Principle X Interest/ fraction of the year ( semi-annually)
what is the journal entries when bonds mature?
dr. Cash
cr. Debt investment
true or false: the cost of debt security can be either higher or lower than its maturity value.
true
Recording trading securities with fair value. TechCom’s portfolio of trading securities had a total cost of $11,500 and a fair value of $13,000 on 12/31/21, the first year it held trading securities. Record fair value.
Dr. Fair value Adjustment- trading 1500
cr. Unrealized gain- Trading 1500
what are the three-step adjusting process?
- Determine the unadjusted balance.
- determine whether the adjustment balance should be equal.
- Record the adjustment entry.
Are fair value adjustments a permanent or temporary account.
Permanent assets account.
Held-to-maturity securities. long-term or short-term.
long term if more than one year.
what are the journal entries when selling trading securities?
Dr. Cash
Cr. Debt Investment- Trading
Cr. gain on sale of debt investment
If Tech com sold some of its trading securities that had cost $100 for $120 cash on 01/09/22. Record the journal entry.
Dr. Cash 120
Cr. Debt investment- trading 100
Cr. gain of 20
Available for sale ( AFS) Debt or Equity security
debt investment
Held- to maturity securities. Debt or equity maturity
Debt Securities.
true or false: the fair value has to be higher than the cost in order to result in a gain.
true.
