Financial Accounting
4th Edition
ISBN: 9781259307959
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Chapter D, Problem 7RQ
To determine
To Indicate: The two categories of the investments in equity securities under the fair value method.
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Investments in equity securities for which the investor has insignificant influence over the investee are classified for reporting purposes under the fair value method. What is fair value?
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All investments in debt securities and investments in equity securities for which the investor lacks significant influence over the operation and financial policies of the investee are classified for reporting purposes in one of three categories, and can be accounted for differently depending on the classification. What are these three categories?
Chapter D Solutions
Financial Accounting
Ch. D - Prob. 1RQCh. D - 2.How can an investor benefit from an equity...Ch. D - 3.How might investing activity for a company that...Ch. D - Provide an example of an equity investment in...Ch. D - Prob. 5RQCh. D - Prob. 6RQCh. D - Prob. 7RQCh. D - Prob. 8RQCh. D - Prob. 9RQCh. D - 10.When using the fair value method, we adjust the...
Ch. D - Prob. 11RQCh. D - 12.Under what circumstances do we use the equity...Ch. D - Prob. 13RQCh. D - Prob. 14RQCh. D - Prob. 15RQCh. D - 16.What is the flip side of an investment in debt...Ch. D - Prob. 17RQCh. D - Prob. 18RQCh. D - Prob. 19RQCh. D - Prob. 20RQCh. D - Prob. D.1BECh. D - Prob. D.2BECh. D - Prob. D.3BECh. D - Prob. D.4BECh. D - Prob. D.5BECh. D - Prob. D.6BECh. D - Prob. D.7BECh. D - Prob. D.8BECh. D - Prob. D.9BECh. D - Prob. D.10BECh. D - Prob. D.11BECh. D - Prob. D.12BECh. D - Prob. D.1ECh. D - Prob. D.2ECh. D - Prob. D.3ECh. D - Prob. D.4ECh. D - Prob. D.5ECh. D - Prob. D.6ECh. D - Prob. D.7ECh. D - Prob. D.8ECh. D - Prob. D.9ECh. D - Prob. D.10ECh. D - Prob. D.11ECh. D - Prob. D.1APCh. D - Prob. D.2APCh. D - Prob. D.3APCh. D - Prob. D.4APCh. D - Prob. D.1BPCh. D - Prob. D.2BPCh. D - Prob. D.3BPCh. D - Prob. D.4BP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which of the following statements related to securities is not true: O Unrealized gains and losses related to available-for-sale securities are reported in earnings. O Held-to-maturity securities are recorded at amortized cost. O Equity securities without a readily determinable fair value are recorded at cost with impairment losses reported in earnings. O Unrealized gains and losses related to trading securities are reported in earnings.arrow_forwardUnrealized holding gains and losses are included in net income for securities that are classified as available for sale and recorded in the balance sheet by its fair value. True or Falsearrow_forwardwhat is the difference between marketable equity securities held as financial asset at fair value through other comprehensive income AND nontrading equity securities held at fair value through other comprehensive income?arrow_forward
- Answer these three questions.arrow_forwardWhere are changes in the fair value of equity securities and reported? These fair values are readilydeterminable and the securities do not provide the owner with significant influence over the investee.a. as income or loss on the income statementb. as a component of accumulated other comprehensive income on the balance sheetc. as a prior-period adjustment to retained earnings on the balance sheetd. these value changes are not reported until the gain or loss is realizedarrow_forwardAll of the following statements are true regarding available-for-sale securities except a.changes in their fair values are not recognized on the income statement. b.they are recorded at fair value. c.a valuation allowance account is not used with available-for-sale securities. d.changes in their fair values are included as part of stockholders' equity.arrow_forward
- Which of the following is false? A. Under PFRS 9, the basis of carrying investments in debt securities as FVPL, FVOCI, or at amortized cost, is the entity’s business model. B. Under PFRS 9, an investment in equity securities not held for trading is automatically accounted for as FVOCI. C. Reclassification of investment in equity securities under PFRS 9 is not allowed. D. Under PFRS 9, reclassification of investment in debt securities is allowed. Or none of the choices?arrow_forwardTrue or false questionarrow_forwardAn important element in accounting for investment securities concerns the distinction between its noncurrent and current classification. Required: a. Why do most companies maintain an investment portfolio consisting of both current and noncurrent securities? b. What factors should an analyst consider when evaluating whether investments in marketable equity securities are properly classified as current or noncurrent? How do these factors affect the accounting treatment for unrealized losses?arrow_forward
- Which of the following is a false statement about applying the equity method? O A. One of the disclosures necessary under the equity method of accounting for investments is the difference, if any, between the amount at which an investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference. OB. Depending on the circumstances, an investor may be required to account for an investment in voting common stock under the fair- value method even though the investor owns more than 20% of the voting common stock. OC. Company A owns 15% of Company B's voting common stock but did have significant influence until it acquired 10% more. Company A's investment, results of operations (current and prior periods presented), and retained earnings should be adjusted prospectively. OD. Company A owns 20% of Company B's voting common stock and sells 1%. Company A's investment, results of operations (current and prior periods presented), and retained…arrow_forwardWhy are unrealized gains and losses on available-for-sale securities not reported in theincome statement, but instead are reported in other comprehensive income, and thenshown in accumulated other comprehensive income (AOCI) in the balance sheet?arrow_forwardAll of the following are true of the effect of fair value accounting on the financial statements except: a. any difference between the original cost or the prior period’s fair value must be recorded b. changes in the fair value of trading securities are recognized on the income statement c. valuation allowance accounts are reported on the balance sheet d. changes in the fair value of available-for-sale securities are recognized on the income statementarrow_forward
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