Lesson 3 Debt & Equity Securities

Question 1

Bonds and written Loan commitments are financial instruments that

Answer 1

Are not required to be reported at FV in a companies financial statement

Question 2

Stock options held as an investment must

Answer 2

Be reported at Fair Value in a company’s financial states

US GAAP

Question 3

A small dividend (less than 20-25%) is

Answer 3

Credited to retained earnings at its market value

Question 4

A large stock dividend (greater than 20-25%) is

Answer 4

Credited to retained earnings at par value

Question 5

If a 9 year bond is sold in year 3 what will it be classified as?

Answer 5

Trading security and reported at FV on B/S

Question 6

Unrealized gains and Losses on AFS securities are reported as when the Fair Value option is elected?

Answer 6

Report as component of income from continuing operations

Question 7

What’s the journal entry to report unrealized gains on AFS securities?

Answer 7

Gains
Dr (increase) investment
Cr (increase) OCI

Losses
Dr (decrease) OCI
Cr (decrease) investment

Question 8

When a security is reclassified from trading to available for sale the amount is reported?

Answer 8

As an AFS is the market value on the date of transfer

Question 9

The valuation allowance for an AFS will be decreases if

Answer 9

An item market value drops from previous year

Question 10

The allowance for decline in value is the same as?

Answer 10

Net unrealized loss to be reported on the Balance sheet

Question 11

What must be disclose on held to maturity debt securities?

Answer 11

The market value of the investment