FAR 3 Flashcards
What are the two types of marketable securities:
Debt and Equity Securities
What are the three classifications of marketable securities
Trading Securities
Available for Sale Securities
Held to Maturity Securities
Trading Securities are classified as?
Current Assets
Available for sale securities are GENERALLY classified as?
Non-current assets
Held to maturity securities are ___ securities only
debt
Held to maturity securities are classified as?
Non-current assets
Trading and available for sale securities must be reported at _________ ______________.
Fair Value
Unrealized gains and losses for trading securities are included in _________
Earnings.
Unrealized gains and losses for available for sale securities are included in _____________
other comprehensive income
How do you record a unrealized loss for trading securities?
Debit: unrealized loss on trading securities
Credit: Valuation Account
How do you record a unrealized loss for available for sale securities?
Debit: unrealized loss on available for sale securities
Credit: Valuation Account
How are held to maturity securities valued?
At amortized cost
Entities should report marketable equity securities classified as trading at:
Fair value, with holding gains and losses included in earnings
What is the best way to remember the procedure for the equity method?
“BASE”
B - Beginning Balance
A - Add: Investor’s share of investee’s earning (like bank interest; it is income when earned, not when taken out).
S - Subtract: Investors share of investee’s dividends
E - Ending Balance
Just like a bank account.
True or False: Under the equity method, land is amortized over the life of the asset.
False: Land is never amortized.
