Chapter 15: Investments and International Operations

cost (amortized)

HTM securities are recorded at ____.

equity securities

____ _____ are recorded at cost when acquired, including commissions or brokerage fees

others revenues and gains

a gain on trading securities is reported in which section of the income statement?

other expenses and losses

a loss on trading securities is reported in which section of the income statement?

income statement

any cash dividends received are credited to dividend revenue and reported in the ____ ____.

not

any prior period fair value adjustment to the trading securities portfolio is ____ used to compute the gain or loss of its trading securities.

income statement

any unrealized gain (or loss) from a change in the fair value of the portfolio of trading securities is reported on the ________ __________.

not

any unrealized gain or loss for the portfolio of AFS securities is ___ reported on the income statement

multinational

company that operates in several countries

conversion

cash dividends revived by an investor from an investee are viewed as a _____ of one asset to another

income statement statement of cash flows

consolidated financial statement's revenues and expenses are combined on one _____ _____, and cash flows are combined on one ___ ____ ____ ____.

book value

cost of investment + investor's equity in the undistributed earnings of the investee

short-term investments

debt and equity securities that management expects to convert to cash within the next 3 to 12 months (or the operating cycle if long); also called temporary investments or marketable securities

cost

debt securities are recorded at ___ when purchased

held-to-maturity securities

debt securities that a company has the intent and ability to hold until they mature.

subsidiary

entity controlled by another entity (parent) in which the parent owns more than 50% of the subsidiary's voting stock

temporary

earnings from long-term investment is a ____ account and is reported on the investor's income statement

other comprehensive income

equals net income less comprehensive income; includes unrealized gains and losses on available-for-sale securities, foreign currency adjustments, and pension adjustments

parent

exclusive right granted to its owner to produce and sell an item or to use a process for 20 years

permanent

fair value adjustment- trading is a ______ account, which adjusts the reported value of the trading securities portfolio from its prior period fair value to the current period fair value

consolidated financial statements

financial statements that show all (combined) activities under the parent's control, including those of any subsidiaries.

unrealized gain or loss

gain or loss not yet realized by an actual transaction or event such as a sale

portfolio

group of securities

reduces

if the investee incurs a net loss instead of a net income, the investor records its share of the loss and _____ (credits) its investment account

earned

interest revenue of HTM securities are recorded when _____.

available-for-sale securities

investments in debt and equity securities that are not classified as trading securities or held-to-maturity securities.

equity securities with significant influence

long-term investment when the investor is able to exert significant influence over the investee; investors owing 20% or more (but less than 50%) of voting stock are presumed to exert significant influence

noncurrent

long-term investments are reported in the ______ section of the balance sheet, often under its own separate title "long-term investments"

comprehensive income

net change in equity for a period, excluding owner investments and distributions

foreign exchange rate

price of one currency stated in terms of another currency

return on total assets

ratio reflecting operating efficiency; defined as net income divided by average total assets for the period; also called return on assets or return on investments

debt securities

reflect a creditor relationship such as investments in notes, bonds, and certificates of deposit; they are issued by governments, companies and individuals.

equity securities

reflect an owner relationship such as shares of stock issued by companies

current assets

short-term investments are reported under ____ _____ and serve a purpose similar to cash equivalents

investor

the _____ closes this earnings or loss account to the Income Summary

higher lower

the cost of a debt security can either be ___ or ___ than its maturity value

maturity value

the cost of a long-term debt security equals its ____ ____

not one

the investment account is ___ reported on the parent's financial statements; instead the individual assets and liabilities of the parent and its subsidiaries are combined on ____ balance sheet

fair value

the portfolio of trading securities is reported at its ____ ____.

not revenue

the receipt of cash dividends is ____ _____ under the equity method because the investor has already recorded its share of the investee's earnings

current assets

trading securities are always reported as ____ ____.

temporary

unrealized gain (or loss) for trading securities is a _____ account that is closed to the Income Summary at the end of each period

securities

when the _____ are sold, sale proceeds are compared with the cost, and any gain or loss is recorded.

amortized

when the investment is long term, the difference between cost and maturity value is _____ over the remaining life of the security

current assets

which section of the balance sheet are held-to-maturity securities reported in if their maturity dates are within one year or the operating cycle ?

long term assets

which section of the balance sheet are held-to-maturity securities reported in if their maturity dates longer than one year or the operating cycle ?

fair value

companies must value and report most non influential investments at ____ ____.

trading securities

investments in debt and equity securities that the company intends to actively trade for profit

cash equivalents

investments that are both readily converted to known amounts of cash and mature within three months

no

is there a fair value adjustment to the portfolio of HTM securities?

long-term investments

long-term assets not used in operating activities such as notes receivable and investments in stocks and bonds

equity securities with controlling influence

long-term investment when the investor is able to exert controlling influence over the investee; investors owning 50% or more of voting stock are presumed to exert controlling influence.

gain or loss

net proceeds - cost of trading securities sold

equity method

rraccounting method used for long-term investments when the investor has "significant influence" over the investee

other revenues and gains

the unrealized gain (or loss) of trading securities is reported in the ____ ____ ____ ____ section on the income statement

equity section

unrealized gain or loss form the portfolio of AFS securities are reported in the _____ _____ of the balance sheet

equity method with consolidation

used to account for long-term investments in equity securities with controlling influence