Investment Property/Securities Flashcards
Available for sale securities G/L are recognized where?
They are recognised in Equity. Not in Earnings.
Assume a creditor releases a debtor from being primarily responsible for a liability because an unrelated third-party legally assumes the liability, with the original debtor becoming secondarily liable for the obligation. Which of the following statements is correct?
I. The original debtor’s liability has been extinguished.
II. The original debtor became a guarantor of the liability.
III. The original debtor may recognize a gain or loss on its release from the obligation.
D. I, II, and III.
The original debtor’s liability has been extinguished, the debtor has become a guarantor of the liability now held by a third-party, and the original debtor may recognize a gain or loss on its release from the obligation.
Investments in equity securities that have a readily determinable market value and all debt securities of a not-for-profit organization are reported at
C. Fair value.
According to ASC 958-320-35-1, not-for-profit organizations report their investment in debt securities and equity securities at fair value.
Solen Co. and Nolse Co. exchanged trucks with fair values in excess of carrying amounts. In addition, Solen paid Nolse to compensate for the difference in truck values.
The exchange lacks commercial substance.
As a consequence of the exchange, Solen recognizes
Neither a gain nor a loss.
Solen has an implied gain given that the fair value of its asset exceeds its book value. But when there is no commercial substance, such gains are recognized only when cash is received. Solen paid cash on the exchange.
