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FAR 2014 > Investments > Flashcards

Investments Flashcards

1
Q

How are Available-For-Sale securities recorded on the Balance Sheet?

A

At Fair value as either Current or Non-current assets.

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2
Q

How are Available-For-Sale security Unrealized G/L treated?

A

Included in OCI (Other Comprehensive Income)

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3
Q

How are Unrealized G/L for Available-For-Sale securities that are reclassified to Held-to-Maturity or Trading Securities treated?

A

HTM - Stockholder’s Equity
/ Trading Securities - Current Period.

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4
Q

How are Held-to-Maturity securities recorded on the Balance Sheet?

A

Amortized cost as Current or Non-current assets.

If reclassified as AFS - Unrealized G/L go to Stockholder’s Equity

If reclassified as Trading Securities - Unrealized G/L recognized in Current Period

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5
Q

How are Held-to-Maturity securities Unrealized G/L treated?

A

Trick question - Unrealized gains or losses are not applicable because they are HTM

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6
Q

How are Trading Securities recorded on the Balance Sheet?

A

At Fair Value as a Current Asset

Unrealized gains/losses are recorded on the Income Statement

If they are reclassified as held-to-maturity or available-for-sale- there is no effect upon transfer.

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7
Q

How are Trading Securities Unrealized G/L treated?

A

Recorded on the Income Statement

If they are reclassified as HTM or AFS - there is no effect upon transfer.

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8
Q

How are realized gains and losses reported for HTM investments

A

Included in income for period

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9
Q

How are brokerage fees and selling expenses treated for investment gain or loss

A

Included in calculation for sale of securities

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10
Q

How is OCI changed when AFS investment is sold

A

Offset and unrealized loss in OCI

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11
Q

What are trading securities

A

Securities held for current resale

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12
Q

What are AFS securities

A

Securities not held for current resale and not HTM

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13
Q

When is a gain reported for an AFS security

A

Only if security was sold for a price in excess of its cost

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14
Q

How are permanent declines in AFS security value treated

A

Decline included in period income

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15
Q

With AFS securities, how is a temporary decline in year 1 that becomes permanent in year two treated?

A

No effect on investment account

Credit OCI and debit Loss on income statement

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16
Q

Where is dividend income reported

A

In income from continuing operations

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17
Q

How are Nonmonetary assets received in a nonreciprocal transfer recorded

A

At FV of asset received

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18
Q

How is a Nonmonetary asset to stockholder recorded

A

At FV of asset removed

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19
Q

Where are Nonmonetary transactions recorded on the statement of cash flows

A

Under disclosures

20
Q

How is a dividend receive in excess of earrings reported

A

As a reduction of investment account

21
Q

How are inter company receivables and payables recorded for FV and equity method

A

Not eliminated, recorded as separate disclosures

22
Q

How is a transfer from AFS to HTM recorded

A

Report gain or loss as accumulated OCI amortized over life of security as adjustment to yield

23
Q

At what value is transfer of security reported between categories

A

Fair value

24
Q

How does an election to FV affect unrealized loss

A

all unrealized loss for year included in income

25
Q

How to calculate income from equity method investment

A

Investment company income x % owned - amortized cost over BV of assets from purchase (Depreciable assets only)

26
Q

Equity method calculate adjusted carrying value of investment

A

Cost + (company income x % owned) - amortized cost over BV from purchase - (dividends x % owned)

27
Q

Equity method earnings calculation with cumulative preferred dividends

A

Whether declared or not, earnings should be computed after deducting the investees cumulative preferred dividends

28
Q

Calculate dividend income for cumulative preferred stock

A

% owned x $ of stock outstanding x preferred dividend %

29
Q

Equity method - earnings affect which accounts

A

Increase investment account and increase income

30
Q

How are dividends recorded for AFS securities? Exceptions?

A

Dividends received are income to investor, no decrease in investment account unless dividend received had been in excess of earnings. Then decrease investment account

31
Q

Examples of equity method substantial influence

A

Majority of officers on board

Majority shareholder

32
Q

How to treat amortization of cost over BV if attributed to land or goodwill?

A

No amortization unless Depreciable

33
Q

How to account for change from non equity method to equity method

A

Restate financial statements to show like equity method was used all along. Income until equity method date x old owned% + income after equity method date x new owned %

34
Q

Equity method journal entry to record amortization due to cost in excess of BV attributed to equipment

A

DR investment revenue

CR investment

35
Q

Equity method journal entry for cash dividend

A

DR cash

CR investment

36
Q

Under equity method how are intercompany profit/loss, receivable and payables treated

A

Intercompany profit and loss eliminated

Intercompany receivables and payables recorded separately

37
Q

How are proportional stock dividends treated by various methods

A

Stock dividends not recognized as dividend income under any method

38
Q

How is cash dividend on preferred stock calculated

A

Shares x par x preferred dividend %

Watch for dividends in arrears

39
Q

How is a receipt of stock rights recorded

A

Cost of investment is allocated between stock and rights based on fair value

40
Q

Life insurance - how is expense calculated

A

Cash paid - (ending CSV - beginning CSV) - cash dividend received

41
Q

Life insurance journal entry for dividends that increase CSV

A

DR CSV

CR insurance expense

42
Q

How is an increase in CSV reported

A

As a decrease in insurance expense

43
Q

How is life insurance gain calculated

A

Insurance proceeds received - CSV

44
Q

Under IFRS when can the fair value through profit and loss method be used

A

Only when security is traded in active market

45
Q

What are the investment categories under IFRS

A

Fair value through profit and loss, AFS, HTM

FAR 2014 (19 decks)

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