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Exam 13: Investments and Fair Value Accounting

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Question 21

True/False

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Any difference between the fair market values of the securities and their cost is a realized gain or loss.

A) True
B) False

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Question 22

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Define debt securities and equity securities. Include their similarities and differences in your discussion.

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Debt securities are notes and bonds that...

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Question 23

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Match each of the definitions that follow with the appropriate investment term a-j) . -securities not held for trading or to maturity or other strategic reasons

Discuss the similarities and differences in reporting trading securities, available-for-sale securities and held-to-maturity securities.

Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet.

On January 1, the Valuation Allowance for Available-for-Sale Investments account had a zero balance. On December 31, the cost of the available-for-sale securities was $48,700, and the fair value was $39,200. Prepare the adjusting entry to record the unrealized gain or loss for available-for-sale investments on December 31.

Available-for-sale securities are securities that management expects to sell in the future, but are not actively traded for profit.

Following is data for the available-for-sale securities held by Lindy Company as of December 31: a) Complete the table above to find the total cost and fair value for the company's available­for­sale securities portfolio. b) Calculate and record the required December 31 adjustment. c) Explain how the adjustment from step 2) is reported on Lindy's financial statements.

If the proceeds from the sale of bond investments exceed the carrying amount of the bonds, a gain is realized.

What are the total proceeds from the February 1 sale?

Foreign currency translation adjustment is an example of an item that would be included in other comprehensive income.

The primary objectives of investing in temporary investments is to

Companies may report comprehensive income on each of the statements below except

The dividend yield is measured as

Investment in certificates of deposit and other securities that do not change in value are reported on the balance sheet as

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

Match each of the definitions that follow with the appropriate investment term a-j) . -a balance sheet account where the fair value adjustment for investments is reported

The company whose stock is more than 50% owned by another company is called the

Unrealized gains and losses on trading securities are not included in the calculation of income from operations.

The income statement for Hudson Company reported net income of $345,000 for the year ended December 31 before considering the following: During the year the company purchased trading securities. At year end, the fair value of the investment portfolio was $23,000 less than cost. The balance of Retained Earnings was $823,000 on January 1. Hudson Company paid $43,000 in cash dividends during the year. Calculate the balance of Retained Earnings on December 31.