Videos
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.
Want to see the full answer?
Check out a sample textbook solution
Chapter 15 Solutions
Fundamental Accounting Principles
- General accountingarrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…arrow_forwardNonearrow_forward
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education