F5 - Investments, Stmt of CF, & Inc Taxes

Question 1

HTM Carrying Amount on IS

Answer 1

Carrying amount X Market Rate = Int Income

Face value X Coupon rate = Int payment

Amortization amount = Int Income - Cash Int Payment

Question 2

Amortizing a Premium

Answer 2

Decreasing the the carrying amount
Cash Int received (Higher) - Int Income (Lower)

Question 3

Amortizing a Discount

Answer 3

Amortizing a discount increases the carrying amount
Int Income (higher) and the cash int received (lower)

Question 4

JE for INT Income & Amortization

Answer 4

DR Cash (for the int payment received)
CR Int Income (for the effective int method)
AND
Adjust Investment in Bonds for the amortization amount

Question 5

Initial JE for Bond Purchase

Answer 5

DR Inv in Bonds (purch price)
CR Cash

Reflecting the investment at its acquisition cost

Question 6

Straight Line (How to figure Annual Amortization)

Answer 6

Face Value - Purch price / period of amortization = Annual Amortization
Discount or Premium

Question 7

Equity Method

Answer 7

Use when ownership is 20%-50%

Ownership % = Investment Amount / Total Value of Voting Shares

Question 8

Bond Investments that are HTM - Held-to-Maturity

Answer 8

Are reported at amortized costs

Question 9

AFS should be recorded at

Answer 9

OCI unless impaired

Question 10

Trading Securities

Answer 10

Are to be measured at Fair Value and recorded in Income Stmt

Trading securities are reported at Fair Value

If bond investments are classified as trading securities (held for the purpose of selling them in near term)