FAR Module 16

Question 0

This includes ownership interests, rights to acquire ownership interests, and rights to dispose of ownership interests

Answer 0

Equity securities

Question 1

This is any security representing a creditor relationship with an entity

Answer 1

Debt securities

Question 2

These are the three classifications for investments in bonds

Answer 2

Held to maturity
trading
available for sale

Question 3

This classification of investments is shown at carrying value or amortized cost

Answer 3

Held to maturity

Question 4

These two classifications of investments in bonds adjust cost to fair value by taking into account unrealized gains and losses

Answer 4

Trading

Available for sale

Question 5

What is the key difference between trading and available-for-sale securities

Answer 5

The key difference is where unrealized gains and losses are recognized:

Trading securities are recognized on the income statement.

Available-for-sale securities are recognized in other comprehensive income and accumulated other comprehensive income on the balance sheet, shown net of tax

Question 6

What are the classifications for investments in stock and how do they differ from investments in bonds

Answer 6

Trading
available for sale

there are no held to maturity investments in stock!

Question 7

Trading investments in bonds and stocks are classified as what? (either short-term or long-term)

Answer 7

Short-term

Question 8

Available for sale investments in bonds and stocks are classified as what? (Either short-term or long-term)

Answer 8

Long-term

Question 9

What percentage usually defines that an owner cannot exercise significant influence

Answer 9

Less than 20%

Question 10

What percentage usually defines that an owner can exercise significant influence

Answer 10

Between 20 and 50%

Question 11

When an owner can exercise significant influence what method of accounting do you use

Answer 11

Equity method

Question 12

T/F

An owner can still exercise significant influence even if they own less than 20% of the company

Answer 12

TRUE

Question 13

These securities are debt and equity securities bought and held principally for the purpose of selling them in the short term

Answer 13

Trading securities

Question 14

How and where are trading securities reported on the balance sheet

Answer 14

At fair value and grouped with current assets on the balance sheet

Question 15

where are unrealized holding gains and losses reported on the income statement or the balance sheet for trading securities

Answer 15

Unrealized gains and losses are included in earnings in the period they occur on the income statement

Question 16

How are realized gains and losses reported on the income statement for trading securities

Answer 16

Realized gains and losses that are not already recognized as unrealized components are recognized

Question 17

These are debt and equity securities that are not classified as trading or held to maturity

Answer 17

Available for sale

Question 18

How and where are available-for-sale securities reported on the balance sheet

Answer 18

At fair value and may be classified as current or noncurrent assets (determined on an individual basis)

Question 19

How are unrealized holding gains and losses reported on the income statement or the balance sheet for available for sale securities? Does it matter if the decline is temporary?

Answer 19

Unrealized gains and losses for a period are excluded from earnings and reported as other comprehensive income on the balance sheet.

If the decline is other than temporary then you recognize in earnings on the income statement

Question 20

How are realized gains and losses reported on the income statement for available-for-sale securities

Answer 20

Realized gains and losses are recognized which includes unrealized holding gains or losses recognized previously as unrealized

Question 21

These are debts securities that the organization has the positive intent and ability to hold to the maturity date

Answer 21

Held to maturity securities

Question 22

How are held to maturity securities reported on the balance sheet

Answer 22

Reported at amortized cost and may be classified as current or noncurrent (determined on an individual basis)

Question 23

How are unrealized holding gains and losses reported on the income statement or the balance sheet for held to maturity securities

Answer 23

Unrealized gains and losses are excluded from earnings (unless the decline is other than temporary)

Question 24

How are realized gains and losses reported on the income statement for held to maturity securities

Answer 24

Realized gains and losses are recognized in accordance with the amortized cost method