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ACCT 101 > Lecture 21 > Flashcards

Lecture 21 Flashcards

1
Q

minority active investment

A

20%-50% ownership

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2
Q

minority passive investment

A
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3
Q

a company’s investment in debt securities is a ___ investment

A

passive - debt holders have no ownership

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4
Q

accounting at acquisition

A

same for all cases

investment recorded and reported @cost, at the fair value of what was paid to acquire the securities

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5
Q

HTM

A

NOT APPLICABLE TO EQUITY

debt: investments that the company has positive intent and ability to hold until maturity

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6
Q

Trading

A

both debt & equity

held primarily for sale in the near term to generate income on short term price differences

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7
Q

AFS

A

available for sale; both debt & equity

investments that aren’t classified as HTM or trading

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8
Q

4 types of journal entries for marketable securities

A
  1. record acquisition
  2. record receipts of interest or dividends
  3. record change in market prices of investments
  4. record sale
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9
Q

how much would a company pay for a bond?

A

PV coupon + PV face value

if semi-annual coupon payments, use semi-annual discount rate & n*2 payments

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10
Q

journal entry to record acquisition (HTM)

A

investment in Mkt Sec (HTM)

Cash

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11
Q

journal entry to record coupon receipts (HTM)

A

cash
investment in Mkt Sec (HTM)

Int Rev

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12
Q

interest revenue =

A

Beg balance of investment * discount rate (semi-annual)

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13
Q

journal entry to record price increases (HTM)

A

NO ENTRY

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14
Q

cash receipts of bonds

A

DO NOT CHANGE

=face value * coupon rate

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15
Q

journal entry to record loss on sale (HTM)

A

Cash
(realized) Loss on sale

investment in Mkt Sec account (HTM)

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16
Q

realized gains/losses for HTM are recorded in ___

A

income statement

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17
Q

realized gains/losses are recorded in ___

A

income statement

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18
Q

journal entry to record dividend (interest) receipts (trading)

A

div (interest) receivable

div (interest) revenue

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19
Q

dividend (interest) revenue for trading is recorded in ___

A

income statement

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20
Q

dividend (interest) revenue is recorded in ___

A

income statement

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21
Q

minority passive investment

A

=

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22
Q

a company’s investment in debt securities is a ___ investment

A

passive - debt holders have no ownership

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23
Q

accounting at acquisition

A

same for all cases

investment recorded and reported @cost, at the fair value of what was paid to acquire the securities

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24
Q

HTM

A

NOT APPLICABLE TO EQUITY

debt: investments that the company has positive intent and ability to hold until maturity

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25
Q

Trading

A

both debt & equity

held primarily for sale in the near term to generate income on short term price differences

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26
Q

AFS

A

available for sale; both debt & equity

investments that aren’t classified as HTM or trading

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27
Q

4 types of journal entries for marketable securities

A
  1. record acquisition
  2. record receipts of interest or dividends
  3. record change in market prices of investments
  4. record sale
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28
Q

how much would a company pay for a bond?

A

PV coupon + PV face value

if semi-annual coupon payments, use semi-annual discount rate & n*2 payments

29
Q

journal entry to record acquisition (HTM)

A

investment in Mkt Sec (HTM)

Cash

30
Q

journal entry to record coupon receipts (HTM)

A

cash
investment in Mkt Sec (HTM)

Int Rev

31
Q

interest revenue =

A

Beg balance of investment * discount rate (semi-annual)

32
Q

adjustment previously recognized unrealized holding loss for trading is recorded in ___

A

income statement

33
Q

cash receipts of bonds

A

DO NOT CHANGE

=face value * coupon rate

34
Q

Beg balance of investment

A

investment in Mkt Sec account

35
Q

journal entry to record gain/loss on sale

A

Cash
(realized) Loss on sale

investment in Mkt Sec account (HTM)

36
Q

realized gains/losses are recorded in ___

A

income statement

37
Q

journal entry to record acquisition (Trading)

A

investment in Mkt Sec account

cash

38
Q

journal entry to record interest receipts

A

div (interest) receivable

div (interest) revenue

39
Q

dividend (interest) revenue is recorded in ___

A

income statement

40
Q

journal entry to record change in market value (Trading)

A

allowance to adjust to market (Trading)

unrealized holding gain

41
Q

unrealized holding gain/loss for trading recorded in ___-

A

income statement

42
Q

allowance to adjust to market is a _____

A

companion account to investments account

43
Q

net value of investments =

A

balance in allowance acct + book value of investments

44
Q

allowance to adjust to market

A

can have debit or credit balance

captures the net unrealized gains and losses that have been recognized in the past

45
Q

ending balance in allowance account should be such that…

A

end of the period net value = market value

46
Q

debit in allowance

A

increases value of investments

47
Q

credit in allowance

A

decreases value of investments

48
Q

realized gains for trading recorded in ___

A

income statement

49
Q

journal entry to record sale of trading w/ a gain

A

Cash

Investment in Mkt Sec (trading)
realized gains

50
Q

what do you need to do when you sell the trading security?

A

CLOSE ALLOWANCE

51
Q

journal entry to close allowance acct

A

allowance to adjust to market

adjustment previously recognized unrealized holding loss

52
Q

adjustment previously recognized unrealized holding loss for trading is recorded in ___

A

income statement

53
Q

journal entry to record acquisition of AFS

A

investment in mkt sec (AFS)

cash

54
Q

journal entry to record dividend (int) receipts for AFS

A

dividend (interest) receivable

dividend (interest) rev

55
Q

dividend (interest) rev for AFS recorded in ___

A

income statement

56
Q

journal entry to record change in market value (AFS)

A

allowance to adjust to market (AFS)

unrealized holding gains

57
Q

unrealized holding gain/loss for AFS recorded in ___

A

OCI in SE of BS

58
Q

journal entry for unrealized holding gain

A

allowance to adjust to market

unrealized holding gain

59
Q

journal entry for unrealized holding loss

A

unrealized holding loss

allowance to adjust to market

60
Q

realized gains for AFS recorded in ___

A

income statement

61
Q

adjustment previously recognized unrealized holding loss/gain for AFS recorded in ___

A

OCI account (BS)

62
Q

major diff b/w trading and AFS

A

unrealized gains and losses flow thru IS for trading

unrealized gains and losses goes directly to OCI (BS) for AFS

63
Q

NI is more volatile for ___ securities

64
Q

RE under ___ doesn’t include unrealized gains/losses

65
Q

equity method accounting

A

initial book value of the investment is the purchase price (historical cost)

after acquisition, recognize:

  1. affiliate’s earnings
  2. affiliate’s div payments
66
Q

journal entry for recognizing affiliate’s earnings

A

investment in affiliate (A+)

equity in earnings (NI+)

67
Q

journal entry to recognize affiliate’s div payments

A

cash (A+)

investment in affiliate (A-)

68
Q

use equity method when…

A

you own 20-50% of affiliate

69
Q

EB Marketable securities =

A

BB + Purchases - Cost of securities sold/matured

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