ACG 4101 CH 3
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
