Investments

Question 1

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

Answer 1

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

Question 2

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

Answer 2

Included in OCI (Other Comprehensive Income)

Question 3

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

Answer 3

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

Question 4

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

Answer 4

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

Question 5

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

Answer 5

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

Question 6

How are Trading Securities recorded on the Balance Sheet?

Answer 6

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.

Question 7

How are Trading Securities Unrealized G/L treated?

Answer 7

Recorded on the Income Statement

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

Question 8

Unrealized Gain and Losses for trading Securities are included in…

Answer 8

Earnings (IDA)

Unrealized gain pr loss on trading securities are shown in the income statement

Question 9

What is the journal entry to record loss from trading securities on the income statement

Answer 9

Unrealized loss on trading securities 
               valuation account (FV adjustment)

Question 10

Unrealized Gains and Losses on Available for Sale Securities (including those classified as current assets are reported in:

Answer 10

Other comprehensive Income (OCI)

“PUFER”

Question 11

what is the journal entry to record unrealized loss reported in other comprehensive income:

Answer 11

Unrealized loss on available for sale securites 
             Valuation account (FV adjustment)

Question 12

Where are realized gains and losses from the sale of a security recognized?

Answer 12

On the income statement

Question 13

When are realized gains and losses from a security recognized?

Answer 13

When securities are sold or Available for sale security is deemed to be Impaired

On the income Statement

Question 14

What do you value HTM securities at?

Answer 14

Amortized costs

Question 15

If you are reclassifying a trading security to a available for sale security what happens to unrealized holdings gain or loss?

Answer 15

Unrealized holding gain or loss at date of transfer have already been recognized in earnings and can not be reversed

Question 16

If you are reclassifying a securities to a trading security when and where should you recognized unrealized holding?

Answer 16

Unrealized holding gains and losses at the date of transfer should be recognized immediately in earnings.

Question 17

If you are transferring a HTM debt security to Available for sale security where should unrealized holding gain or loss be recognized?

Answer 17

unrealized holding gain or loss at the date of transfer should be reported in OCI

Question 18

If a available for sale security is reclassified as a held to maturity security what should happen to unrealized holding gain or loss?

Answer 18

should be amortized over remaining life of security as an adjustment of yield
Unrealized holding Gain or loss is already reported in OCI at this point

Question 19

What happens if there is a permanent impairment loss on an available for sale or HTM securities

Answer 19

if there is an impairment loss the securities is written down to FV and that is the new cost basis

The amount of write down is a realized loss and included in earnings (IS)

Question 20

What does a sale of security from any category result in?

Answer 20

Sale of security results in a realized gain or loss reported on the income statement for the period

Question 21

What do you do with a valuation account when a security is sold?

Answer 21

Remove it

Question 22

Realized gain or loss for selling a trading security is computed as?

Answer 22

Trading security realized gain=selling price-adjusted cost(original cost +/- unrealized gains/losses previously recognized on IS)

Question 23

Realized gain or loss for selling an available for sale security is computed as?

Answer 23

Realized gain=selling price-original cost of security

any unrealized gain or losses in accumulated OCI must be reversed at the sale of securities

Question 24

What is the JE to record a sale of a trading security?

Answer 24

Cash
Trading security
Realized gain on training security (IDA)

Question 25

What is the JE to record a sale of an available for sale security?

Answer 25

Cash
Unrealized gain on available for sale security(PUFER)
available for sale security
Realized gain on available for sale security(IDA)

We are taking unrealized gain out of AOCI