中級財務(wù)會計英文ch09

1、Chapter 9-1InvestmentsChapter 9Intermediate Accounting12th EditionKieso, Weygandt, and Warfield Prepared by Coby Harmon, University of California, Santa BarbaraChapter 9-2lIdentify the three categories of debt securities and describe the accounting and reporting treatment for each category.lUndersta

2、nd the procedures for discount and premium amortization on bond investments.lIdentify the categories of equity securities and describe the accounting and reporting treatment for each category.lExplain the equity method of accounting and compare it to the fair value method for equity securities.lDesc

3、ribe the disclosure requirements for investments in debt and equity securities.lDiscuss the accounting for impairments of debt and equity investments.lDescribe the accounting for transfer of investment securities between categories.Learning ObjectivesChapter 9-3lUse of idle cashlLow risk investments

4、lQuickly and easily converted to cashlSecurities of federal, state, and local government agenciesTemporary InvestmentsChapter 9-4lDevelop beneficial intercompany relationships.lMay indirectly improve profitability of investing company.lMay represent ownership interest.Long-Term InvestmentsChapter 9-

5、5lClassification- Managements intended holding period for the securitylValuation and investment income measurement- Cost vs. fair value- Treatment of holding gains & losseslDisclosureAccounting IssuesChapter 9-6lDebt or equity security?lFair value readily determinable?lManagements intended holdi

6、ng period?lInfluence or control over investee? - Only for equity securities with voting rightsClassifying InvestmentsChapter 9-7lRepresent creditor relationship with an entity.- US Treasury securities, municipal securities, corporate bonds, convertible debt, commercial paper, and redeemable preferre

7、d stockDebt SecuritiesChapter 9-8lRepresent ownership interest in an entity or the right to acquire or to dispose of an ownership right at a fixed price.- Common stock, preferred stock, warrants, rights, and options Equity SecuritiesChapter 9-9ClassificationInvestment in Debt SecuritiesInvestment in

8、 Equity SecuritiesControl-greater than 50% ownership of voting stock.Not applicableConsolidationSignificant influence-generally, 20% to 50% ownership of voting stock.Not applicableEquity methodDebt securities classified as held to maturity, and equity securities for which fair value is not readily d

9、eterminable.Amortized cost methodCost methodDebt and equity securities classified as trading securities.Fair value method, with unrealized holding gain or loss included in earningsDebt and equity securities classified as available for sale.Fair value method, with unrealized holding gain or loss incl

10、uded as a component of stockholders equitySecuritiesChapter 9-10ClassificationInvestment in Debt SecuritiesInvestment in Equity SecuritiesControl-greater than 50% ownership of voting stock.Not applicableConsolidationSignificant influence-generally, 20% to 50% ownership of voting stock.Not applicable

11、Equity methodDebt securities classified as held to maturity, and equity securities for which fair value is not readily determinable.Amortized cost methodCost methodDebt and equity securities classified as trading securities.Fair value method, with unrealized holding gain or loss included in earnings

12、Debt and equity securities classified as available for sale.Fair value method, with unrealized holding gain or loss included as a component of stockholders equityTrading securities (TS) are bought and held primarily to be sold in the near term.SecuritiesChapter 9-11ClassificationInvestment in Debt S

13、ecuritiesInvestment in Equity SecuritiesControl-greater than 50% ownership of voting stock.Not applicableConsolidationSignificant influence-generally, 20% to 50% ownership of voting stock.Not applicableEquity methodDebt securities classified as held to maturity, and equity securities for which fair

14、value is not readily determinable.Amortized cost methodCost methodDebt and equity securities classified as trading securities.Fair value method, with unrealized holding gain or loss included in earningsDebt and equity securities classified as available for sale.Fair value method, with unrealized hol

15、ding gain or loss included as a component of stockholders equitySecurities available for sale (SAS) are expected to be held for an unspecified period of time.SecuritiesChapter 9-12ClassificationInvestment in Debt SecuritiesInvestment in Equity SecuritiesControl-greater than 50% ownership of voting s

16、tock.Not applicableConsolidationSignificant influence-generally, 20% to 50% ownership of voting stock.Not applicableEquity methodDebt securities classified as held to maturity, and equity securities for which fair value is not readily determinable.Amortized cost methodCost methodDebt and equity secu

17、rities classified as trading securities.Fair value method, with unrealized holding gain or loss included in earningsDebt and equity securities classified as available for sale.Fair value method, with unrealized holding gain or loss included as a component of stockholders equityHeld to maturity (HTM)

18、 securities are those where the investor intends and has the ability to hold the security to maturity date.SecuritiesChapter 9-13 Amount at which a financial instrument could be exchanged in a current transaction between a willing buyer and willing sellerEquity SecuritiesFair ValueChapter 9-14lRecor

19、ded at cost when acquired.Purchase price and incidental costslBasket purchase requires allocation of the total cost to each class of security purchased.Based on relative market valuesTS and SASFair ValueChapter 9-15 100 shares of A Company common stock at $50 per share 300 shares of B Company common

20、 stock at $80 per share 200 shares of Company C preferred stock at $120 per share. $15,000 Company D 10% bonds$ 5,00024,00024,00015,000Kent Company purchases the following securities on May 1, 2006, as an investment in available-for-sale securities:Total $68,000TS and SASFair ValueChapter 9-16Invest

21、ment in Available-for-Sale Securities 68,000Interest Revenue 625 Cash 68,625TS and SASFair ValueChapter 9-17Accrued interest on the D Company bond from November 30, 2005, to May 31, 2006May 31, 2006 Interest Revenue750 Cash750 TS and SASFair ValueChapter 9-18December 31, 2006Interest Receivable125 I

22、nterest Revenue125Cash3,000 Dividend Revenue3,000During 2006 Kent Company receives dividends of $3,000 from its investment in the stocks of A, B, and C Companies.TS and SASFair ValueChapter 9-19lTS and SAS are reported at fair value on the balance sheet.lThe difference between the fair value and the

23、 carrying value from the previous balance sheet date (or the cost if acquisition occurred in the current period) is an unrealized holding gain or loss.TS and SASFair ValueChapter 9-20lThe unrealized holding gain or loss must be determined for individual securities.lEach security has a valuation allo

24、wance account (Allowance for Change in Value of Investment).TS and SASFair ValueChapter 9-21The cost and fair value of the available-for-sale securities held by the Kent Company is as follows: CumulativeChange Fair in FairSecurity Cost Value Value 100 shares of A Co. common stock$ 5,000$ 6,000$1,000

25、 300 shares of B Co. common stock24,00023,500(500)200 shares of C Co. preferred stock 24,00026,0002,000 D Company 10% bonds15,00015,500 500 Totals$68,000$71,000$3,000 12/31/06TS and SASFair ValueChapter 9-22The cost and fair value of the available-for-sale securities held by the Kent Company is as f

26、ollows: CumulativeChange Fair in FairSecurity Cost Value Value 100 shares of A Co. common stock$ 5,000$ 6,000$1,000 300 shares of B Co. common stock24,00023,500(500)200 shares of C Co. preferred stock 24,00026,0002,000 D Company 10% bonds15,00015,500 500 Totals$68,000$71,000$3,000 12/31/06TS and SAS

27、Fair ValueChapter 9-23The same securities are held on December 31, 2007. Cumulative Change Fair in FairSecurity Cost Value Value 100 shares of A Co. common stock$ 5,000$ 6,100$1,100 300 shares of B Co. common stock24,00022,700(1,300)200 shares of C Co. preferred stock 24,00023,200(800)D Company 10%

28、bonds15,00014,000(1,000) Totals$68,000$66,000$(2,000)12/31/07TS and SASFair ValueChapter 9-2412/31/06 3,0005,000 adjusting entry2,000 12/31/07TS and SASFair ValueChapter 9-25lThe individual unrealized holding gains and losses are added together to arrive at the net portfolio unrealized holding gain

29、or loss.lNet unrealized holding gains and losses are calculated separately for the TS portfolio and the SAS portfolio.TS and SASFair ValueChapter 9-26 Cars Ltd. purchased the following securities in 2004. The fair value of the securities at December 31, 2004 is also indicated.No. ofUnitTotalFairType

30、NameSharesCostCostValueTSGloves, Inc.1,000$6$6,0006,500$ TSSportsWear1,50012 18,000 16,000 SAS General Boots1,0005 5,000 9,500 SAS Leather Goods2,00010 20,000 18,000 TS and SASFair ValueChapter 9-27 Prepare the necessary journal entries for Cars Ltd. to adjust the securities to fair market value at

31、December 31, 2004.TS and SASFair ValueChapter 9-28No. ofUnitTotalFairGain orTypeNameSharesCostCostValue(Loss)TSGloves, Inc.1,000$6$6,0006,500$ 500$ TSSportsWear1,50012 18,000 16,000 (2,000) Net Unrealized Holding Loss for TS(1,500)$ SAS General Boots1,0005 5,000 9,500 4,500$ SAS Leather Goods2,00010

32、 20,000 18,000 (2,000) Net Unrealized Holding Gain for SAS2,500$ TS and SASFair ValueChapter 9-29GENERAL JOURNALPage 34DateDescriptionPost. Ref.DebitCreditDec 31 Valuation Allowance:Gloves, Inc.500Net Unrealized Loss on TS1,500 Valuation Allowance:SportsWear2,000To record fair value of TS 31 Valuati

33、on Allowance:General Boots4,500 Net Unrealized Gain on SAS2,500 Valuation Allowance:Leather Goods2,000To record fair value of SASTS and SASFair ValueChapter 9-30Trading securities: The net unrealized holding gain or loss is treated as a component of investment income and is included on the income st

34、atement for the period.Net Unrealized Holding Gains and LossesChapter 9-31Securities available for sale: The net unrealized holding gain or loss is not included in earnings for the period but rather is closed to a separately reported component of stockholders equity.Net Unrealized Holding Gains and

35、LossesChapter 9-32 Investment income (interest and dividends) is included in the earnings of the current period.TS and SAS Investment IncomeChapter 9-33 Cars Ltd. TS and SAS portfolios were as follows on December 31, 5.TS and SAS ExampleChapter 9-34 Determine the unrealized holding gains or losses f

36、or Cars Ltd.s TS and SAS portfolios at December 31, X5.TS and SAS ExampleChapter 9-35 Cars Ltd. TS and SAS portfolios were as follows on December 31, X5.12/31/X512/31/X5Allow.12/31/X4 12/31/X5TotalFairNeededAllow. Adj. EntryTypeNameCostValuedr. (cr.)dr. (cr.)dr. (cr.)TSGloves, Inc.$6,0006,700$ 700$

37、500$ 200$ TSSportsWear18,00017,500 (500) (2,000) 1,500 Net Unrealized Holding Gain on TS1,700$ SAS General Boots5,000 7,000 2,000 4,500 (2,500)$ SAS Leather Goods20,00019,000 (1,000) (2,000) 1,000 Net Unrealized Holding Loss on SAS(1,500)$ TS and SAS ExampleChapter 9-36lInvestment income for debt se

38、curities includes interest plus the amortized portion of any premium or discount related to the debt.lThe amortized cost of the debt is compared with the fair value to determine the unrealized holding gain or loss.TS and SAS Debt SecuritiesChapter 9-37 On 1/1/X5 MacTrucks acquired $100,000 face valu

39、e bonds of Engines, Inc. The bonds mature in 8 years and pay interest annually on 12/31 at a rate of 8%. MacTrucks acquired the bonds at 96 and intends to sell the bonds in the near term. Prepare the entry for 1/1/X5.MacTrucksTS and SAS ExampleChapter 9-38GENERAL JOURNALPage 34DateDescriptionPost.Re

40、f.DebitCreditJan1 Investment in Engines, Inc.96,000 Cash 96,000To record bond purchase $100,000 96% = $96,000TS and SAS ExampleChapter 9-39 On 12/31/X5 MacTrucks received the annual dividend. The bonds had a fair value of 97 on 12/31/X5. Prepare the entry to record the investment income and the unre

41、alized holding gain or loss.MacTrucksTS and SAS ExampleChapter 9-40GENERAL JOURNALPage 88DateDescriptionPost.Ref.DebitCreditDec 31 Cash8,000Investment in Engines, Inc.500 Investment Income8,500To record investment income$4,000 8 = $500TS and SAS ExampleChapter 9-41 $ 96,000 500 96,500Investment in E

42、ngines, Inc.Amortized CostFair Value $97,000 - $96,500 = $500 Unrealized GainTS and SAS ExampleChapter 9-42GENERAL JOURNALPage 88DateDescriptionPost. Ref.DebitCreditDec 31 Valuation Allowance:Engines, Inc.500 Unrealized Holding Gain on TS500To record bond fair valueTS and SAS ExampleChapter 9-43lTra

43、nsfers are accounted for at fair value on the transfer date.lFair value at the reclassification date is regarded as cost of the security for accounting purposes.TS and SAS TransfersChapter 9-44 The Pet Shop has the following investment classified as available for sale. On 12/31/X8, Pet Shops intent

44、changes and the security is reclassified as a trading security. Prepare the reclassification entry.12/31/X8 12/31/X7TotalFairAllow. TypeNameCostValuedr. (cr.)SAS Exotic Fish, Inc. $5,5006,700$ 500$ TS and SAS ExampleChapter 9-45GENERAL JOURNALPage 77DateDescriptionPost. Ref.DebitCreditDec 31 Investm

45、ent in Exotic Fish6,700OE: Accumulated Gain on SAS500 Valuation Allowance:Exotic Fish500 Investment in Exotic Fish5,500 Unrealized Gain on Reclassification1,200To record reclassification from TS to SASTS and SAS ExampleChapter 9-46GENERAL JOURNALPage 77DateDescriptionPost. Ref.DebitCreditDec 31 Inve

46、stment in Exotic Fish6,700OE: Accumulated Gain on SAS500 Valuation Allowance:Exotic Fish500 Investment in Exotic Fish5,500 Unrealized Gain on Reclassification1,200To record reclassification from TS to SASFair ValueCostHolding gain not recognized on previous income statementsTS and SAS ExampleChapter

47、 9-47 The Pet Shop has the following investment classified as a trading security. On 12/31/X8, Pet Shops intent changes and the security is reclassified as available for sale. Prepare the reclassification entry.12/31/X8 12/31/X7TotalFairAllow. TypeNameCostValuedr. (cr.)TSExotic Fish, Inc. $5,5006,70

48、0$ 500$ TS and SAS ExampleChapter 9-48GENERAL JOURNALPage 77DateDescriptionPost. Ref.DebitCreditDec 31 Investment in Exotic Fish6,700 Valuation Allowance:Exotic Fish 500 Investment in Exotic Fish5,500 Unrealized Gain on Reclassification700To record reclassification from TS to SASTS and SAS ExampleCh

49、apter 9-49GENERAL JOURNALPage 77DateDescriptionPost. Ref.DebitCreditDec 31 Investment in Exotic Fish6,700 Valuation Allowance:Exotic Fish 500 Investment in Exotic Fish5,500 Unrealized Gain on Reclassification700To record reclassification from TS to SASFair ValueCostHolding gain not recognized on pre

50、vious income statementsTS and SAS ExampleChapter 9-50lSales are accounted for in a manner similar to transfers.lThe only difference is that Cash is debited instead of the fair value of the securities. TS and SAS SalesChapter 9-51On March 1, 2008, the Kent Company sold 100 shares of A Company stock f

51、or $6,000. The stock had a fair value on Dec. 31, 2007, of $6,100.Cash6,000 Investment in SAS5,000 Gain on Sale of SAS1,000The (DR) and the allowance (CR) account are reduced by $1,100.TS and SAS SalesChapter 9-52 A decline in fair value below cost that is not expected to be recovered.Trading securi

52、ties: Any impairment in fair value is included in the unrealized holding gain or loss that is already included in periodic income. TS and SAS Impaired ValueChapter 9-53Securities available for sale:lThe recorded cost of the security is reduced to the impaired fair value, and the difference is includ

53、ed in the current periods income.lThe new cost basis (the impaired fair value) is not changed for subsequent recoveries in fair value.TS and SAS Impaired ValueChapter 9-54lFor SAS, disclose gross unrealized holding gains and gross unrealized holding losses.lFor debt securities classified as SAS, dis

54、close contractual maturities.TS and SAS DisclosuresChapter 9-55For each period covered by income statement:vNet proceeds from sales of SAS and gross realized gains and gross realized lossesvBasis on which cost was determinedvGross gains and gross losses included in income from transfers from SASvAmo

55、unt of net unrealized gain or loss for SAS that is included in equityvAmount of net unrealized holding gain or loss on TS included in earningsTS and SAS DisclosuresChapter 9-56CostMethodEquityMethodAmortizedCostFair ValueMethodChapter 9-57ClassificationInvestment in Debt SecuritiesInvestment in Equi

56、ty SecuritiesControl-greater than 50% ownership of voting stock.Not applicableConsolidationSignificant influence-generally, 20% to 50% ownership of voting stock.Not applicableEquity methodDebt securities classified as held to maturity, and equity securities for which fair value is not readily determ

57、inable.Amortized cost methodCost methodDebt and equity securities classified as trading securities.Fair value method, with unrealized holding gain or loss included in earningsDebt and equity securities classified as available for sale.Fair value method, with unrealized holding gain or loss included

58、as a component of stockholders equitySecuritiesChapter 9-58ClassificationInvestment in Debt SecuritiesInvestment in Equity SecuritiesControl-greater than 50% ownership of voting stock.Not applicableConsolidationSignificant influence-generally, 20% to 50% ownership of voting stock.Not applicableEquit

59、y methodDebt securities classified as held to maturity, and equity securities for which fair value is not readily determinable.Amortized cost methodCost methodDebt and equity securities classified as trading securities.Fair value method, with unrealized holding gain or loss included in earningsDebt

60、and equity securities classified as available for sale.Fair value method, with unrealized holding gain or loss included as a component of stockholders equityFor securities without a fair market value, dividends are included in investment income.SecuritiesChapter 9-59ClassificationInvestment in Debt Sec