Chapter 10 Financial Accounting Flashcards

(26 cards)

1
Q

Investor

A

Entity that owns stock of a corporation

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2
Q

Investee

A

Corporation that issued the stock

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3
Q

Shorts Term Investments

A

Must be liquid

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4
Q

Long Term Investments

A

Expected to be held longer than one year

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5
Q

What are 2 characteristics of Available for Sale Investments?

A

Initially recorded at cost

Reported at market value on the balance sheet

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6
Q

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

A

Unrealized Gain

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7
Q

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

A

Unrealized Loss

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8
Q

What is the companion account to Long Term Investments?

A

Allowance to Adjust Investment to Market

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9
Q

Debit Balance =

A

Cost is greater then market

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10
Q

Credit Balance =

A

Market is less than cost

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11
Q

What does AFS stand for?

A

Available for Sale

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12
Q

What does not impact net income?

A

Unrealized gains or losses on available for sales investments

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13
Q

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

A

Available for Sale

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14
Q

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

A

Equity Method

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15
Q

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

A

Consolidation

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16
Q

What are 4 characteristics of the Equity Method?

A

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
Q

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

A

Original Cost

Share of Net Income

18
Q

What is 1 credit on the Long Term Investment account?

A

Share of Dividends

19
Q

In terms of consolidated subsidiaries, an investor is called?

A

Parent company

20
Q

In terms of consolidated subsidiaries, an investee is called?

21
Q

Financial statements of a parent and its subsidiaries are…

A

Consolidated as if they were one company

22
Q

What are 2 characteristics of Minority Interest?

A

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

23
Q

What does sub stand for?

24
Q

What are 2 characteristics of Long Term Bond Investments?

A

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