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Accounting 3332 > Chapter 17: Investments > Flashcards

Chapter 17: Investments Flashcards

(46 cards)

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1
Q

What are the three types of investments with no significant influence?

A
  1. held-to-maturity
  2. trading securities
  3. available-for-sale
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2
Q

What are the two types of investments with significant influence?

A
  1. equity method

2. consolidation

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3
Q

Investments in debt securities with a maturity date.

A

held to maturity securities

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4
Q

Type of securities that have an intent and ability to hold maturity.

A

held to maturity securities

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5
Q

How are held to maturity securities reported?

A

reported at amortized cost/(face + premium - discount)

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6
Q

How do you record the interest in held to maturities securities using the effective rate method?

A
  • interest revenue: carrying value * market rate
  • cash received for interest: face value * stated rate
  • difference to discount/premium amortization
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7
Q

Investments in debt or equity securities are known as?

A

trading securities

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8
Q

Actively managed in a trading account to benefit from short term price changes?

A

trading securities

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9
Q

In trading securities, fair value changes are unrealized gains/losses in ___.

A

earnings

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10
Q

How are investments reported in trading securities?

A

reported at fair value and are current assets

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11
Q

What actions are taken with the sale of trading securities?

A
  • realized gains/losses in earnings

- update FVA and reverse unrealized gains and losses

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12
Q

Investments that are not classified as TS or HTM securities?

A

available-for-sale securities

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13
Q

Dividends/interest are included in income are in what type of securities?

A

available-for-sale securities

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14
Q

In available-for-sale securities, fair value changes are unrealized gains/losses in ___.

A

other comprehensive income (OCI)

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15
Q

Available-for-sale securities are reported at _____ and could be ___ or ___.

A

fair value; current; noncurrent

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16
Q

What actions are taken with the sale of available-for-sale securities?

A
  • realized gains/losses in earnings

- update FVA and reverse unrealized gains/losses from (OCI)

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17
Q

When adjusting the fair value, trading securities to fair value goes to the ___.

A

income statement

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18
Q

When adjusting the fair value, available for sale securities to fair value goes to the ___.

A

other comprehensive income (OCI)

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19
Q

How do you calculate the FVA of an investment?

Study These Flashcards
A

fair value - discount on bond investment = amortized cost

amortized cost +/- XX = fair value

20
Q

What type of method includes investors that own 20% to 50% of investee stock?

Study These Flashcards
A

equity method

21
Q

In the equity method, the investor can influence financial and operating policies, so this time the investment is recorded at _____ and the investee account is subsequently adjusted.

22
Q

If there is an increase for percentage of investee’s income, then we are going to do this journal entry.

Study These Flashcards
A

Dr. investment in ABC XX

Cr. investment income XX

23
Q

If thre is a decrease for percentage of investee dividends, then we are going to do this journal entry.

Study These Flashcards
A

Dr. cash XX

Cr. investment in ABC XX

24
Q

When there is a purchase price difference in the equity method, we are going to amortize book value differences on the investee’s book by doing this journal entry.

Study These Flashcards
A

Dr. investment income XX

Cr. investment in ABC XX

25
Journal to record the purchase of securities
Dr. Investment in ABC XX | Cr. Cash (% * fair value total) XX
26
Journal to record ownership % of investee income
Dr. Investment in ABC XX | Cr. Investment revenue (% * NI) XX
27
Journal to record receive dividends: liquidation of investment
Dr. Cash XX | Cr. Investment in ABC (%* dividends) XX
28
impairment loss is recorded if _____ is less than _____ and it is considered _____.
fair value; cost; other than temporary (OTT)
29
What factors are considered to determine OTT?
1. length of time market value < cost 2. financial condition of issuer and possibility of recovery 3. intent and ability to retain the investment to allow for anticipated recovery of the decline
30
Securities already at FV and gains/losses in income so no additional adjustment needed.
trading securities
31
Securities that recognize the loss in earnings, reclassifying out of OCI if necessary.
available for sale securities
32
(Financial Statement Disclosures) | On the balance sheet, the investments can be ___ or ___.
current or noncurrent
33
(Financial Statement Disclosures) On the statement of cash flows, trading securities fall in the ___ activities and AFS and HTM fall in the ___ activities.
operating, investing
34
Investments in debt securities that the investor has intent and ability to hold to maturity.
Held to maturity
35
Investments in debt or equity securities held in an acitve trading account for immediate resale.
trading securities
36
Investments in debt or equity securities that do not qualify as HTM or trading.
Available for sale
37
Investor has significant influence over investee policies. Owns twenty to fifty percent of investee voting stock.
equity method
38
The investor controls investee. Owns more than fifty percent of the investee voting stock.
consolidation
39
If the investor elects the _____ , the investment is reported at fair value and unrealized holding gains/losses are included in earnings.
fair value option
40
What is the treatment of unrealized gains and losses with held to maturity?
- no gains or losses | - not recognized
41
What is the treatment of unrealized gains and losses with trading securities?
recognized in net income (flows through to retained earnings in equity)
42
What is the treatment of unrealized gains and losses with available for sale?
recognized in other comprehensive income (flows into AOCI in equity)
43
How is the investment of held to maturity reported in the balance sheet?
amortized cost
44
How is the investment of trading securities reported in the balance sheet?
fair value
45
How is the investment of available for sale reported in the balance sheet?
fair value
46
What is the cash flow impact for: - held to maturity - trading - available for sale
- held to maturity to investing activities - trading to operating activities - available for sale to investing activitites

Accounting 3332 (10 decks)

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