ACG 4101 CH 3

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A holding loss is classified as

A contra investment account

Marlon company recognizes interest expense of 5400 related to its bonds; its periodic bonds interest payments are 5200. Bonds are issued at

A discount

Classified as a current liability

Accounts payable, accrued salaries, current maturities of long term debt

Recognizing interest each period as the effective market rate of interest multiplied by the outstanding balance of the investment represents an application of the

Accrual concept

Salaries payable, interest payable and taxes payable are examples of

Accrued liabilities

Accrued liability

An expense that has been incurred but will be paid in a future period

All investments are initially recorded

At cost

Holding gains and losses are unrealized because the related investment has not

Been sold

Realized gain or loss for a trading security

Difference between carrying value and the cash received from selling a trading security

Items held for sale in the normal course of business are classified in the balance sheet as

Inventory

Investors utilize the ______ interest rate to value the stream of cash flows associated with bond investments

Market

The interest rate for debt of similar risk and maturity is referred to as the

Market interest rate

The price of a bond is equal to the

Present value of the future cash receipts

From an accounting perspective, critical events that investors experience over the life of an investment includes

Sale of investment ad changes in fair value

Cash interest is calculated with reference to the

Stated interest rate

What conditions must be present for a debt security to be classified as held to maturity

The investor intends to hold the security until maturity and the investor has the ability to hold the security until maturity

Which of the following types of investments are reported at fair value

Trading and available for sale

What are the classifications possible for investments in which the investor doesn't exert significant influence

Trading securities, available for sale and held to maturity securities

A debt security has

A maturity date on which it matures

James company earns $6000 on its investment in trading securities. James company should

Credit investment revenue

Multiplying the carrying value of an investment in bonds by the effective market rate measures the amount of interest

Earned during the period

Information necessary to calculate interest revenue each period

Effective interest rate and outstanding debt balance

Kuhn company purchases an investment in equity securities and lacks significant influence. Kuhn may elect to value the investment at

Fair value

Gains and losses that have not been realized through sales of the related investment are also referred to as

Holding gains and losses

If the interest rate paid on a bond exceeds the market interest rate the bond will sell for an amount that is

More than its maturity

Holding gains and losses associated with investments properly classified as held to maturity are

Not recognized

How are notes different from accounts payable

Notes require the payment of explicit interest in addition to the original obligation amount

If a company's long term investments are not material in amount, where should they be disclosed on the balance sheet

Other assets

Holding gains and losses associated with investments properly classified as available for sale are

Recognized as other comprehensive income

Holding gains and losses associated with investments properly classified as trading securities are

Recognized as part of income

Fair value adjustments for trading securities are

Recognized in a separate account rather than debiting/crediting the investment account


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