INTERM.ACCT.:REPORTING...-CENGAGENOWV2
3rd Edition
ISBN: 9781337909358
Author: WAHLEN
Publisher: CENGAGE L
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Textbook Question
Chapter 13, Problem 5C
Available-for-Sale Securities
The following are four unrelated situations involving investments in available-for-sale securities:
Situation I
A portfolio of available-for-sale debt securities with an aggregate fair value in excess of amortized cost includes one particular security whose fair value has declined to less than one-half of its amortized cost. The decline in value is considered to be other than temporary.
Situation II
The portfolio of available-for-sale debt securities includes securities that have an amortized cost in excess of fair value of $500. The remainder of the portfolio has a net fair value in excess of amortized cost of $1,000.
Situation III
An available-for-sale debt security, whose fair value is currently less than its amortized cost, is reclassified as a trading security.
Situation IV
A company’s portfolio of available-for-sale securities consists of the bonds of one company. At the end of the prior year, the fair value of the security was 95% of amortized cost, and the effect was properly reflected in an allowance account. However, at the end of the current year, the fair value of the debt security had appreciated to 102% of the amortized cost.
Required:
Explain the effect on classification, earning value, and earnings for each of the preceding situations.
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What is Correct option
Which of the following statements is correct in regard to trading bond investment?
a. Trading bond investments are held with the intention of selling them in a short period of time
b. Unralized gains and losses are reported as part of income
c. both are correct
d. both are incorrect
(Financial Statement Effect of Securities) Presented below are three unrelated situations involving equity securities.Situation 1: A debt security, whose fair value is currently less than cost, is classified as available-for-sale but is to be reclassified as trading.Situation 2: A noncurrent held-to-maturity portfolio with an aggregate fair value in excess of cost includes one particular debt security whose fair value has declined to less than one-half of the original cost. The decline in value is considered to be permanent.Situation 3: The portfolio of trading debt securities has a cost in excess of fair value of $13,500. The available-for-sale debt portfolio has a fair value in excess of cost of $28,600.InstructionsWhat is the effect upon carrying value and earnings for each of the situations above?
Chapter 13 Solutions
INTERM.ACCT.:REPORTING...-CENGAGENOWV2
Ch. 13 - Prob. 1GICh. 13 - Provide brief definitions for the following terms:...Ch. 13 - What are the three categories of investments in...Ch. 13 - Prob. 4GICh. 13 - Prob. 5GICh. 13 - Identify the accounting methods a company uses for...Ch. 13 - Briefly summarize the accounting for an investment...Ch. 13 - Prob. 8GICh. 13 - Prob. 9GICh. 13 - Prob. 10GI
Ch. 13 - Prob. 11GICh. 13 - Prob. 12GICh. 13 - Prob. 13GICh. 13 - Prob. 14GICh. 13 - Prob. 15GICh. 13 - Briefly describe how to determine and record the...Ch. 13 - Prob. 17GICh. 13 - Prob. 18GICh. 13 - Prob. 19GICh. 13 - Briefly describe how to determine and record any...Ch. 13 - Prob. 21GICh. 13 - Prob. 22GICh. 13 - Prob. 23GICh. 13 - Prob. 24GICh. 13 - How does IFRS categorize minority passive...Ch. 13 - Prob. 26GICh. 13 - Prob. 27GICh. 13 - Prob. 28GICh. 13 - Prob. 29GICh. 13 - Prob. 30GICh. 13 - Prob. 31GICh. 13 - What is a fund? Distinguish between a fund and an...Ch. 13 - Prob. 33GICh. 13 - Prob. 34GICh. 13 - Prob. 1MCCh. 13 - During 2021, Anthony Company purchased debt...Ch. 13 - On July 1, 2019, Aldrich Company purchased as an...Ch. 13 - In 2021, Cromwell Corporation purchased bonds of...Ch. 13 - Prob. 5MCCh. 13 - A security in a portfolio of available-for-sale...Ch. 13 - On its December 31, 2018, balance sheet, Fay...Ch. 13 - Prob. 8MCCh. 13 - Cash dividends declared out of current earnings...Ch. 13 - On January 1, 2019, Park Company accepted a...Ch. 13 - Prob. 1RECh. 13 - Prob. 2RECh. 13 - Prob. 3RECh. 13 - Refer to the information in RE 13-3. Assume that...Ch. 13 - Prob. 5RECh. 13 - Refer to the information in RE13-5. Assume that on...Ch. 13 - Refer to the information in RE13-5. Assume that on...Ch. 13 - Prob. 8RECh. 13 - On February 1, 2019, Razorback Corporation decides...Ch. 13 - On September 30, Franz Corporation notices a...Ch. 13 - Prob. 11RECh. 13 - Refer to the information in RE13-11. Assume that...Ch. 13 - Prob. 13RECh. 13 - Prob. 14RECh. 13 - On January 1, Kilgore Inc. accepts a 20,000...Ch. 13 - Prob. 16RECh. 13 - Prob. 1ECh. 13 - Held-to-Maturity Securities and Amortization of a...Ch. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Investment Discount Amortization Schedule On...Ch. 13 - Investment Premium Amortization Schedule On...Ch. 13 - Prob. 7ECh. 13 - Trading Securities At the beginning of 2019, Able...Ch. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Available-for-Sale Securities On December 31,...Ch. 13 - Available-for-Sale Securities At the beginning of...Ch. 13 - Available-for-Sale Securities At the end of 2018,...Ch. 13 - Transfer between Categories On December 31, 2018,...Ch. 13 - Impairment On June 1, 2019, Hansen Company...Ch. 13 - Equity Securities Midwest Bank invests in equity...Ch. 13 - Equity Securities Southeast Bank invests in equity...Ch. 13 - Prob. 18ECh. 13 - Prob. 19ECh. 13 - Prob. 20ECh. 13 - Notes Receivable On January 1, 2019, Crouser...Ch. 13 - Notes Receivable On January 1, 2019, Worthylake...Ch. 13 - Note Receivable in Installments On January 1,...Ch. 13 - Notes Receivable and Income On January 1, 2019,...Ch. 13 - Prob. 25ECh. 13 - Sinking Funds Entries The following information is...Ch. 13 - (Appendix 13.1) Derivatives Anglar Company has a 3...Ch. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Bond Investment Premium Amortization Schedule...Ch. 13 - Prob. 5PCh. 13 - Trading Securities Akers Company invests its...Ch. 13 - Investment in Trading Securities The following...Ch. 13 - Prob. 8PCh. 13 - Available-for-Sale Securities Holly Company...Ch. 13 - Investment in Available-for-Sale Bonds The...Ch. 13 - Investments in Available-for-Sale Bonds During...Ch. 13 - Equity Securities The investment manager of 4th...Ch. 13 - Equity Securities 8th State Bank prepares interim...Ch. 13 - Investments in Equity Securities Noonan...Ch. 13 - Investments in Equity Securities Manson...Ch. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Equity Method and Subsequent Sale On January 1,...Ch. 13 - Prob. 21PCh. 13 - Notes Receivable On January 1, 2019, Somerville...Ch. 13 - Notes Receivable On January 1, 2019, Lisa Company...Ch. 13 - Comprehensive Notes Receivable On January 1, 2019,...Ch. 13 - Prob. 25PCh. 13 - (Appendix 13.1) Derivatives Danburg. Company has a...Ch. 13 - Realized and Unrealized Losses An important part...Ch. 13 - Investments in Securities Cane Company has two...Ch. 13 - Prob. 3CCh. 13 - Victoria Company has investments in marketable...Ch. 13 - Available-for-Sale Securities The following are...Ch. 13 - Prob. 6CCh. 13 - You are an accountant for Davanzo Company. The...Ch. 13 - Prob. 8C
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- Held-to-maturity investments applies only to debt securities because ________. A. the classification is dependent on the investor's intention to hold the investment until maturity, and equity securities do not mature on a specific date B. these are long-term investments C. these securities earn periodic interest D. the classification is dependent on the investor's level of influence over the investee companyarrow_forwardA security in a portfolio of available-for-sale securities is transferred to the trading category. The security should be transferred between the corresponding portfolios at: a. book value at date of transfer if higher than the fair value at date of transfer b. fair value at date of transfer, regardless of its cost c. cost, regardless of the fair value at date of transfer d. lower of its cost or fair value at date of transferarrow_forwardWhen an investment in an available-for-sale debt security is transferred to trading because the company anticipates selling the security in the near future, the carrying value assigned to the investment when transferring it to the trading portfolio should be O the higher of its original cost or its fair value at the date of the transfer. O the lower of its original cost or its fair value at the date of the transfer. O its fair value at the date of the transfer. O its original cost.arrow_forward
- A bond investment that satisfy the amortized cost measurement may be designated a. irrevocably at either fair value through other comprehensive income or fair valiue through profit or loss. b. irrevocably at fair value through other comprehensive income c. revocably at fair valiue through profit or loss. d. irrevocably at fair value through profit or lossarrow_forward1. A bond investment that satisfies the amortized cost measurement may be designated a. Revocably at fair value through profit or loss b. Irrevocably at fair value through profit or loss c. Irrevocably at fair value through OCI d. Irrevocably at amortized costarrow_forwardShort-term investments are also called marketable securities. True or False True Falsearrow_forward
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- GAAP requires investments in bonds classified as trading securities to be reported at their: A. fair value. B. net realizable value. C. maturity value. D. historical cost.arrow_forwardHello, Under IFRS 9, companies that invest in equity securities choose from which of the following options for reporting their investing? a. FV-NI only b. FV-NI or FV-OCI c. Amortized cost or FV-NI d. Amortized cost or FV-OCIarrow_forwardsend helparrow_forward
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