Investment : The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment. Held-to-maturity security : The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities. Other-than-temporary (OTT) impairment : When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment. Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity , other than stock investments and dividends. Comprehensive income : The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income. Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

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Answer 1

Question

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

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H1.

1. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much unrealized gain (loss) is to be reflected in the statement of changes in equity and statement of comprehensive income at yearend 2020? 2. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: What is the carrying value of the investment on December 31, 2020? 3. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: Determine the gain or (loss) to be recorded upon the sale of the investment.

Gecko Investments has the following data regarding their debt investments as of December 31, 2021: Original Cost Amortized Cost Market Value Trading Bonds 95 96 97 Available for Sale Bonds 95 96 97 Held-to-Maturity Bonds 95 96 97 1. What is the total amount of gain or loss to be reported as part of other comprehensive income? Give both the amount and whether it is a gain or loss.

Answer 2

Question

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

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Answer 3

Question

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Answer 6

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Answer 7

Chapter 12, Problem 12.31E

1.

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity, are referred to as held-to-maturity securities.

Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.

Other Comprehensive income (OCI): OCI includes all financial items which result in changes in the stockholders’ equity, other than stock investments and dividends.

Comprehensive income: The total of net income and other comprehensive income (OCI) is referred to as comprehensive income. Comprehensive income should be reported on income statement, and statement of comprehensive income.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Answer 8

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Answer 9

2.

To determine

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5Q Ch. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8Q Ch. 12 - Prob. 12.9Q Ch. 12 - Prob. 12.10Q

Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions to abide by the double-entry system.

To Indicate: The effect of the following scenarios on the 2018 Income Statement of Company B.

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Chapter 12 Solutions