investments intermediate

Marian Company's records show the following account balances at 2/1/18: Investment in HTM securities, $500,000; and discount on HTM investment, $20,000. On that day, the company sells the investment for $520,000. The journal entry would include debits of (Select all that apply.)

$20,000 to discounts. $520,000 to cash.

Bella Company purchased debt securities with a face amount of $500,000 for $480,000 and classifies them as trading securities. During the first year, the company amortized $2,000 of the associated discount. At the end of the period, the fair value is $504,000. Bella should recognize a fair value adjustment of

$22,000.

Which of the following are common financial instruments that are used to finance or expand a company's operations? (Select all that apply.)

Corporate bonds Common stock Preferred stock

financial instruments

Equity and debt securities

$40,000 to gain from sale of investment. $500,000 to investments in HTM securities.

Marian Company's records show the following account balances at 2/1/18: Investment in HTM securities, $500,000; and discount on HTM investment, $20,000. On that day, the company sells the investment for $520,000. The journal entry would include credits of (Select all that apply.)

At the end of the accounting period, trading debt securities must be adjusted to

Market value

Which of the following are correct regarding the financial statement presentation of HTM securities? (Select all that apply.)

Unrealized holding gains and losses are disclosed in the notes to the financial statements. Gains and losses are shown in net income in the period in which the securities are sold.

When an equity method investment is sold,

a gain or loss is recognized if the sales price is more or less than the book value.

Investments that are properly classified as held-to-maturity should be carried at

amortized cost.

If the market rate of interest decreases after a bond is purchased, the bond incurs

an unrealized holding gain

Trading securities typically are classified in the balance sheet as

current assets

Northern Company has bonds with an amortized cost of $600,000. At the end of the first reporting period, the bonds had a fair value of $675,000. 2 days after the end of the first reporting period, the bonds have a fair value of $680,000 and Northern decides to sell the bonds. The initial investment in the bonds was $700,000 and the discount on bond account has a $100,000 balance. Northern properly classifies these bonds as trading securities. The journal entry to record the sale of the bonds includes (Select all that apply.)

debit to discount on bond investment $100,000 credit to fair value adjustment $80,000. credit to investment in bonds $700,000 debit to cash $680,000

The fair value option can be applied to:

financial liabilities financial assets

Gains and losses relating to debt securities classified as trading are presented in the in the periods in which fair value changes, regardless of whether they are realized or unrealized. (Enter one word per blank.)

income statement

Cash flows from buying and selling held-to-maturity securities are typically classified as _____ activities on the Statement of Cash Flows.

investing

An investor who purchased corporate bonds that are not publicly traded may estimate the bonds' fair value by determining the

present value of future cash flows

Question Mode Multiple Choice Question The price of a bond is equal to the

present value of future cash receipts.

the price of a bond is equal to

present value of future interest payments plus present value of principal

Holding bonds during periods in which the fair value of the bonds changes results in

unrealized holding gains and losses

if a company holds bonds that are not actively traded it can estimate the fair value of those bonds by using

present value techniques

Unrealized holding gains and losses associated with debt investments properly classified as "available for sale" are

recognized as other comprehensive income.

Jones Financial Institution buys and sells debt securities frequently to maximize short-term gains in market value. Jones should classify its portfolio as Multiple choice question. trading securities.

trading securities