Chapter 10 Financial Accounting Flashcards Preview

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Flashcards in Chapter 10 Financial Accounting Deck (26):
1

Investor

Entity that owns stock of a corporation

2

Investee

Corporation that issued the stock

3

Shorts Term Investments

Must be liquid

4

Long Term Investments

Expected to be held longer than one year

5

What are 2 characteristics of Available for Sale Investments?

Initially recorded at cost
Reported at market value on the balance sheet

6

In terms of valuing investments, what happens when you increase in market value?

Unrealized Gain

7

In terms of valuing investments, what happens when you decrease in market value?

Unrealized Loss

8

What is the companion account to Long Term Investments?

Allowance to Adjust Investment to Market

9

Debit Balance =

Cost is greater then market

10

Credit Balance =

Market is less than cost

11

What does AFS stand for?

Available for Sale

12

What does not impact net income?

Unrealized gains or losses on available for sales investments

13

What accounting method to do use when the investor owns up to 20%?

Available for Sale

14

What accounting method to do use when the investor owns 20%-50%?

Equity Method

15

What accounting method to do use when the investor more than 50%?

Consolidation

16

What are 4 characteristics of the Equity Method?

Investor has significant influence over the investee
-Investment is recorded at cost
Investment is increased by investee earnings
Investment is decreased by investee dividends

17

What are the 2 debits to the Long Term Investment Account?

Original Cost
Share of Net Income

18

What is 1 credit on the Long Term Investment account?

Share of Dividends

19

In terms of consolidated subsidiaries, an investor is called?

Parent company

20

In terms of consolidated subsidiaries, an investee is called?

A subsidiary

21

Financial statements of a parent and its subsidiaries are...

Consolidated as if they were one company

22

What are 2 characteristics of Minority Interest?

Recorded in consolidation process and be included in liabilities
- Occurs when parent owns less than 100% of subsidiary

23

What does sub stand for?

Subsidiary

24

What are 2 characteristics of Long Term Bond Investments?

Called held to maturity investments
Reported at amortized cost

25

Held to Maturity Investments

Fixed and set maturity rate

26

What does Consolidation in Foreign Subsidiaries result in?

Results in foreign currency translation adjustment

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