Podcast
Questions and Answers
Securities which could be classified as held-to-maturity are?
Securities which could be classified as held-to-maturity are?
- Treasury stock
- Municipal bonds (correct)
- Redeemable preferred stock
- Warrants
Unrealized holding gains or losses which are recognized in income are from debt securities classified as?
Unrealized holding gains or losses which are recognized in income are from debt securities classified as?
- Available-for-sale
- Trading (correct)
- None of these answers are correct
- Held-to-maturity
Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses included as other comprehensive income are?
Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses included as other comprehensive income are?
- Trading debt securities
- Never-sell debt securities
- Held-to-maturity debt securities
- Available-for-sale debt securities (correct)
Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses are?
Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses are?
GAAP specifies that, regarding the amortization of a premium or discount on a debt security, the?
GAAP specifies that, regarding the amortization of a premium or discount on a debt security, the?
How much did Miller pay for its 25% interest in Wall?
How much did Miller pay for its 25% interest in Wall?
Under the equity method, if an investee company generates net income, the investor company?
Under the equity method, if an investee company generates net income, the investor company?
What should Pharoah report as investment revenue for 2021 if it owns 4400 of the 10000 shares?
What should Pharoah report as investment revenue for 2021 if it owns 4400 of the 10000 shares?
What is the amount of unrealized loss for Crane Company to appear as a component of comprehensive income for the year ending December 31, 2021?
What is the amount of unrealized loss for Crane Company to appear as a component of comprehensive income for the year ending December 31, 2021?
What is the amount of interest revenue recognized in 2021 related to the bonds acquired by Sheridan Company?
What is the amount of interest revenue recognized in 2021 related to the bonds acquired by Sheridan Company?
What amount of gain or loss will Sunland Corporation report in its income statement for the year ended December 31, 2022?
What amount of gain or loss will Sunland Corporation report in its income statement for the year ended December 31, 2022?
Transfers between categories are?
Transfers between categories are?
Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes?
Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes?
When a company holds between 20% and 50% of the outstanding stock of an investee, which statement applies?
When a company holds between 20% and 50% of the outstanding stock of an investee, which statement applies?
What amount should Sunland report in its 2021 income statement for unrealized holding loss?
What amount should Sunland report in its 2021 income statement for unrealized holding loss?
Unrealized gains and losses on available-for-sale securities are?
Unrealized gains and losses on available-for-sale securities are?
Flashcards
Held-to-maturity securities
Held-to-maturity securities
Debt securities that the company intends and has the ability to hold until maturity.
Unrealized holding gains or losses
Unrealized holding gains or losses
Gains or losses that have not yet been realized through a sale.
Equity securities (<20%)
Equity securities (<20%)
Equity securities with holdings of less than 20% are accounted for by fair value.
Effective-interest method
Effective-interest method
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Equity method
Equity method
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25% Ownership Investment Value
25% Ownership Investment Value
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44% Ownership Investment Revenue
44% Ownership Investment Revenue
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Unrealized Loss
Unrealized Loss
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Interest Revenue Recognition
Interest Revenue Recognition
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Investment Loss
Investment Loss
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Fair Value Transfers
Fair Value Transfers
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Bond Purchase Accounting
Bond Purchase Accounting
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20% to 50% ownership accounting
20% to 50% ownership accounting
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Unrealized Holding Loss
Unrealized Holding Loss
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Available-for-sale securities reporting
Available-for-sale securities reporting
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Study Notes
Securities Classification
- Held-to-maturity securities include municipal bonds.
- Unrealized holding gains or losses from securities classified as trading are recognized in income.
- Available-for-sale debt securities recognize unrealized gains or losses as other comprehensive income, impacting stockholders' equity.
Equity Securities
- Equity securities with holdings of less than 20% are accounted for by recognizing unrealized holding gains or losses.
- The effective-interest method is required for amortizing premium or discount on debt securities, but other methods can be used if results are not materially different.
Accounting Methods
- Under the equity method, an investor records their share of the investee's net income as an increase in the investment account.
- An investment yielding a 25% ownership results in a value of $172,000 for Miller Company regarding Wall Corporation.
Investment Revenue Reporting
- Pharoah Company, holding 44% of Wildhorse Corp, reports $215,600 in investment revenue.
- Unrealized loss for Crane Company’s portfolio at 12/31/2021 is $34,500 after calculation.
Interest Revenue Recognition
- Sheridan Company recognizes $41,461 in interest revenue for 2021 from Adam Company's bonds when applying the effective-interest method.
Gains and Losses in Investments
- Sunland Corporation's investment results in a $54,000 loss for 2022 when applying the fair value method.
- Transfers between investment categories are always accounted for at fair value.
Accounting Transactions
- Watt Company records the purchase of bonds for $315,000, debiting Debt Investments accordingly.
- When holding 20% to 50% of investee stock, the investor uses the equity method unless unable to exercise significant influence.
Unrealized Holding Loss
- Sunland Corporation shows an unrealized holding loss of $22,400 in their 2021 income statement for trading securities.
- Unrealized gains and losses on available-for-sale securities are reported on the balance sheet.
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