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Concept Introduction:
Fair value of Securities:
When an investment is purchased, it is required to revalue the investment at the end of the year in order to make sure the fair value is correctly reflected in the financial statements.
Fair value refers to the realizable value of the securities at the end of a reporting period. It can be viewed as the replacement cost of the securities if such securities were purchased today.
If the cost of purchase is higher than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
If the cost of purchase is lower than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
Requirement 1:
Cost basis compared to previous years amount
Concept Introduction:
Long term Investments:
Long term investments are made by corporations in several avenues, such as Mutual funds, Government securities such as bonds, and commercial papers, Mortgage and Asset backed securities such as Real Estate Funds etc.
They represent steady income for the investor in the form of periodic interest payments or capital appreciation of the value of the investment.
They are often purchased are issued at par (at face value), at premium (at higher than face value) or at a discount (at lower than face value).
Requirement 2:
8 Types of investments held by Microsoft for the year ended 30 June, 2016.
Concept Introduction:
Fair value of Securities:
When an investment is purchased, it is required to revalue the investment at the end of the year in order to make sure the fair value is correctly reflected in the financial statements.
Fair value refers to the realizable value of the securities at the end of a reporting period. It can be viewed as the replacement cost of the securities if such securities were purchased today.
If the cost of purchase is higher than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
If the cost of purchase is lower than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
Requirement 3:
Unrealized gains and losses of Microsoft for the year ended 30 June, 2016.
Concept Introduction:
Fair value of Securities:
When an investment is purchased, it is required to revalue the investment at the end of the year in order to make sure the fair value is correctly reflected in the financial statements.
Fair value refers to the realizable value of the securities at the end of a reporting period. It can be viewed as the replacement cost of the securities if such securities were purchased today.
If the cost of purchase is higher than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
If the cost of purchase is lower than the fair value of the investment at the time of revaluation, then the difference is debited to the fair value adjustments account.
Requirement 4:
Cost basis compared to recorded amount for the year ended 30 June, 2016.
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Chapter 15 Solutions
Connect Access Card For Fundamental Accounting Principles
- Can you solve this financial accounting problem using appropriate financial principles?arrow_forwardI am searching for the correct answer to this general accounting problem with proper accounting rules.arrow_forwardYou have been asked to test the effectiveness of Ingo Corporation’s control of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases, of which 3,000 were over $25,000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 4 percent (although she expects the rate to be only approximately 0.50 percent) and a 5 percent risk of assessing control risk too low. Use the following to determine the planned assessed level of control risk and the assessed level of control risk. (Planned) Assessed Level of Control Risk Tolerable Deviation Rate Low 2−7% Moderate 6−12% Slightly below the maximum 11−20% Maximum Over 20% b. Determine the appropriate sample size and allowable number of deviations using Figure 9.4. sample size:arrow_forward
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