Chapter 12 Flashcards
(16 cards)
Equity Securities
Common Stock & Preferred Stock
Debt Securities
Bonds & Notes
Bonds purchased at discount means …
the market rate > face value/stated rate
Bonds purchased at premium means..
stated rate/face value > market rate
Journal Entry for purchasing debt investment..
Dr. Investment in Bonds
Cr. Discount on bond investments
Cr. Cash
Trading Investments (TS)
- Unrealized profit/loss will be reported on the income statement
- reported at fair value **
Fair Value Adjustments
- when there is an increase in fair value, there will be unrealized profit
- when there is a decrease in fair value, there will be an unrealized loss
Available-for-Sale
- reported at fair value on the balance sheet
- unrealized profit/loss is reported in the statement of other comprehensive income
Held-to-Maturity
- reported on balance sheet at amortized cost
- classified as investing activities on statement of cash flows
Holding gain or loss in OCI
Investment in AFS debt securities
Holding gain or loss in income
Investment in trading debt securities
No holding gain or loss is recognized
Investment in HTM debt securities
equity adjustments that lack significant influence are accounted for the same way as debt investments classified as
trading securities (TS)
When equity investments that lack significant influence are sold and a fair value adjustment account has been used to increase or decrease the carrying value of the investment, the investment account is credited for the
original cost of the investment.
Under the equity method, dividends received from the investment
decrease the investment account balance
What is the difference between a parent and subsidiary?
