chapter 12 accounting
Andrea Company purchases 30% of sander company's outstanding stock for $420,000. andrea should record this investment at ________.
$420,000
Unrealized holding gains and losses on available-for-sale securities affect ______ _______ income
other comprehensive
which of the following are financial instruments?
cash stock options common stock of another company
rudy company's balance sheet shows the following selected balances: Investment in AFS securities $200,000; fair value adjustment-AFS$10,000 debit balance. During the subsequent year, Rudy sells half of the AFS portfolio. At the end of the current year, the fair value of the remaining portfolio is $115,000. Rudy should.
debit the fair value adjustment account for $5,000
Which reporting method should be used if the investor can exert significant influence over the investee?
equity method
Securities that are classified as available-for-sale or trading are valued at
fair market value
varies by type of investment
lacks significant influence 20% or less
Which of the following assets commonly reported on companies' balance sheets is a special purpose fund classified as a current asset?
petty cash
if a bond sells for more than its maturity value, the bond sells at a ______.
premium
which of the following conditions must be present for a debt security to be classified as "held-to-maturity"?
the investor intends to hold the security until maturity. the investor has the ability to hold the security until maturity.
the treatment of unrealized gains and losses is the same under fair value option and the _____ classification.
trading
investments that are held for an unspecified period of time can be classified as ______ securities or _____ - ______-______ securities.
trading ;available-for-sale
an investor that owns between ___ and ____ percent of the voting stock of an investee is assumed to have significant influence over the investee.
20% & 50%
Consistent with IFRS No. 9, investments in debt securities can be classified as _____ ______, FVOCI, or FVTPL
Amortized cost
Identify critical events that companies experience with respect to investments that must be recognized in the accounting system.
Sale of investment Purchase of investment Changes in fair value investment revenue is earned
investments classified as held-to-maturity should be carried at
amortized cost
investments classified as held-to-maturity, for which the fair value option is not chosen, are reported at _____ ______
amortized cost
Rosa Company purchases securities and classifies them as "trading securities." How should Rosa recognize changes in the value of the investment?
as holding gain or loss in income
which of the following types of investments are reported at fair value
available-for-sale trading
which of the following represents a key difference between the three investment classifications (HTM, AFS, trading) with respect to financial reporting?
classification of unrealized gains and losses
an investor who owns more that 50% of the outstanding voting stock of an investee company is assumed to have
control
an investor who owns more that 50% of the outstanding voting stock of investee company is assumed to have
control
the factor that determines accounting for investments is the _____ that the investor has over the investee
control
investments classified as available-for-=sale securities are initially recognized at
cost
trading securities are initially recorded at ______ and subsequently at ______ _________.
cost, fair value
place the three steps necessary to assess and address OTT impairment losses relating to investments in correct order.
determine if the investment is impaired determine whether any impairment is other than temporary. determine how to account for the impairment.
securities that are classified as available-for-sale or trading are valued at
fair market value
Investments classified as "available-for-sale" securities are reported at
fair value
Consolidation
has control 50% or more
Equity method
has significant influence 20-50%
at the end of the current fiscal period, the fair value of Orbit Company's investment in trading securities exceeds its carrying value by $20,000. orbit should credit this unrealized gain to
holding gain and loss-income.
porter company classified its investment in bailey company as a trading security. Subsequent to the investment, the fair value of the investment increased by $5,000. the result of this increase in value will be an
increase in net income.
an important factor that determines accounting for investments is
influence or control over the investee entity.
______ _____ earned on an investment in trading debt securities is calculated based on amortized value times the effective interest rate.
investment revenue
held-to-maturity, trading, and available-for-sale are possible classifications for investments where the investor _______ significant __________.
lacks; influence
interest revenue is calculated based on the ______ interest rate.
market
an investor is assumed to have control over the investee company if the investor owns _____ of the investee's outstanding voting shares.
more than 50%
characteristics that support classification of investments as trading securities include
motivation to realize short-term profits. frequent and active trading.
under the fair value option, unrealized gains and losses on investment securities are recognized in
net income
comprehensive income includes _____ ______, as well as all other changes in _____ that do not arise from transactions with _______.
net income, equity, owners
which of the following are possible categories for the purpose of classifying investments in the stock of another company?
no significant influence or control control significant influence
other than temporary impairments relating to debt securities may arise from
noncredit losses credit losses
holding gains and losses associated with investments properly classified as "held-to-maturity" are
not recognized
the price of a bond is equal to the _____ value of the _____cash receipts.
present; future
Bonds typically provide two sources of cash flows to investors. These are associated with the payment of ______ and ______.
principal; interest
holding gains and losses associated with investments properly classified as "available for sale" are
recognized as other comprehensive income
the determining factor that affects financial accounting and reporting for investments is whether the investor exerts _____ ______ over the operating and financial policies of the investee.
significant influence
unlike an equity security, a debt security has a ______ date on which it ______.
specified; matures
cash interest is calculated with reference to the _____ interest rate.
stated
identify the info. necessary to calculate cash interest each period.
stated interest rate par value of debt instrument
if the interest rate paid on a bond is lower than the market interest rate, the bond will sell for an amount that is
less than its maturity value.
which of the following are included in the calculation of comprehensive income
other changes in equity from non-owner sources. net income.
holding gains and losses associated with investments properly classified as "trading securities" are
recognized as part of income
which of the following are categories available for classifying investments in debt securities consistent with IRFS no. 9?
Fair value through OCI Amortized cost fair value through profit or loss
