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My Own FAR > Far 4 - Marketable Securities > Flashcards

Far 4 - Marketable Securities Flashcards

1
Q

What are Held-for-Trading(HFT) securities?

A

Securities purchased and held for the short term only

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2
Q

Define Available-for-Sale securities

A

Securities that are purchased and held for the longer term;not meant for sale, but can be sold

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3
Q

Define Held-to-Maturity Securities

A

Securities that are held till they fully mature, meaning bonds.

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4
Q

To what statement do realized gains and losses belong

A

Income

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5
Q

To what statement to unrealized gains and losses of HFT securities belong?

A

Income Statement

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6
Q

Journal entry for purchasing HFT security

A

DR Investment in trading securites, CR Cash

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7
Q

Are HFT Securities held at FMV?

A

Initiallly recorded at cost, carried at FMV

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8
Q

Which are current and which are non-current: HFT, AFS, & HTM

A

HFT-current, AFS-current/non-current, HTM-non-current till last year, then current

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9
Q

HFT Securities are what type of activity: Operating, Investing or Financing?

A

Operating

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10
Q

AFS Securities Securities are what type of activity: Operating, Investing or Financing?

A

Investing

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11
Q

HTM Securities Securities are what type of activity: Operating, Investing or Financing?

A

Normally Investing

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12
Q

How are AFS securities valued?

A

FMV

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13
Q

How are HTM Securites valued?

A

Amortization

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14
Q

What is general approach to reclassifying between HFT and AFS marketable securities?

A

Treat them as being sold from portfolio they are leaving and being repurchased at market value of portfolio they are entering

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15
Q

Reclassifying between HFT and AFS securities

A
  1. Reclassify as FMV
  2. Difference is treated as a realized gain/loss on I/S
  3. Eliminate any related valuation accounts
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16
Q

Reclassifying between HTM & AFS securites

A
  1. Reclassify at FMV
  2. IF HTM to AFS then record in OCI
  3. IF AFS to HTM report unrealized gain/loss on B/S as part of OCI and amortized over remaining life
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17
Q

Unrealized gains/losses on AFS Securities when FMV is elected are reported where?

A

As a component of income from continuing operations

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18
Q

Unrealized gains/losses on trading securities meant for the short term are reported where?

A

As a component of income from continuing operations

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19
Q

Journal entry-rise in value of HFT securities

A

DR Trading securities, CR unrealized gain on trading securities

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20
Q

Journal entry-drop in value of HFT securities

A

DR unrealized loss on trading securities, CR Trading Securities

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21
Q

Journal entry for rise in value of AFS securities

A

Debit AFS Securities, CR unrealized gain on AFS securities

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22
Q

Journal entry for drop in value of AFS Securities

A

DR Unrealized loss of AFS securities, CR AFS securities

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23
Q

If a trading security experiences an “other than temporary loss”, where and how is it recorded?

A

Income statement, and FMV basis is written down.

24
Q

On disposal of an AFS Security, how is loss or gain figured?

A

Cost minus sale price

25
Q

To what statement to unrealized gains and losses of AFS securities belong?

A

Balance sheet

26
Q

To what statement to realized gains and losses of HTM securities belong?

A

Income Statement

27
Q

To what statement to realized gains and losses of HFT securities belong?

A

Income statement

28
Q

To what statement to unrealized gains and losses of AFS securities belong?

A

Balance sheet

29
Q

G/L amounts for AFS securities reported in OCI represent what time frame?

A

Current period

30
Q

G/L amounts for AFS securities reported in Owners Equity represent what time frame?

A

Cumulative

31
Q

What is stated rate of interest?

A

The amount of interest stated that a bond will pay you.

32
Q

What is effective interest rate?

A

The amount of interest actually received from a bond including compounding.

33
Q

How does accrued interest affect a bond’s purchase price?

A

Total price minus accrued interest. For example, a $250,000 bond with $60,000 accrued interest would cost $190,000

34
Q

HFT gains or losses are shown on the I/S. Where is the other “half” of this entry located?

A

ON the B/S in the current asset section.

35
Q

What is a market valuation account?

A

The other half of a gain or loss entry

36
Q

G/L for HFT are shown on I/S in what section?

A

Income from continuing operations

37
Q

G/L for AFS are shown in what section on what statement?

A

On B/S as a part of comprehensive income in equities section

38
Q

Allowance account for G/L for AFS are shown in what section on which statement?

A

B/S in asset section

39
Q

What is the other half of a unrealized G/L entry called?

A

An allowance account

40
Q

How are valuation allowance accounts treated on HFT to AFS reclassification?

A

They are eliminated and totals are converted to realized losses and gains

41
Q

HFT Unrealized G/L appear on what statement?

A

Income statement

42
Q

What statement does AFS unrealized G/L appear?

A

Balance sheet

43
Q

Is a liquidating dividend dividend income?If not, Why?

A

It is recognized as a return of instead OF a return ON investment, and reduces the investment account

44
Q

In the equity method what does a dividend revenue do?

A

It lowers the investment account. DR Cash, CR investment.

45
Q

If an investment is accounted for in the equity method, what items are listed in the income section?

A

Changes in value of the investment and dividend revenue

46
Q

What word contained in an mcq is a sign of an unrealized gain or loss?

A

“Record”

47
Q

In IFRS when using fair value through profit and loss how are HTM securities calculated?

A

Difference between cost and fair value.

48
Q

In IFRS when using fair value through profit and loss how are HFT securities calculated?

A

Difference between cost and fair value.

49
Q

What is a differential?

A

Difference between the cost of an investment and the carrying value of its net assets. It is periodically amortized to reduce investment account

50
Q

When is the cost method used?

A
  • 0-20% ownership

- no marketable price exists

51
Q

Explain cost method

A
  • original investment recorded @ cost
  • adjusts carrying amount for subsequent changes in FMV
  • records dividends as income.
  • if dividends > share of income since acquisition excess treated as liquidating div & reduces investment account.
52
Q

What is cash surrender value in life insurance?

A

What you receive in cash if you terminate the whole life policy.

53
Q

Show journal entry for life insurance.

A

Cash surrender value. xx
Insurance expense. xx
Cash xx

54
Q

What can cause deferred tax liability?

A

When earnings are undistributed and the 80% Dividends receive deduction kicks in. A portion of the undistributed income wil eventually become dividend income, and get taxed.

55
Q

When the fair value option is chosen for marketable securities what items will be listed on the income statement?

A
  1. Changes in fair value

2. Dividends

56
Q

Using the equity method of accounting how should an investor list a receivable? Where should it be shown at?

A

It should be listed on the B/S and completely separate from other receivables.

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