財(cái)務(wù)會(huì)計(jì)學(xué)英文課件：ch8 Investments and Internal Operations

1、Chapter 8Investments and Internal OperationsKey TermsInvestorEntity that owns corporations sharesInvesteeCorporation that issues shares2Copyright 2014 Pearson Education. Investments on the Balance SheetCurrent Assets: Cash$X Short-term investments X Accounts receivableX InventoriesX Prepaid expenses

2、X Total current assets$XLong-term investmentsXProperty, plant and equipmentXIntangible assetsXOther assetsX Total non-current assets$XTotal Assets$X3Copyright 2014 Pearson Education. Accounting Methods for Long-Term InvestmentsPercentage Ownership by the InvestorAccounting TreatmentIFRSUp to 20% (Cl

3、assified as Available-for-Sale)Fair market valueIAS39Up to 20% (Classified as Held-to-Maturity)Amortized CostIAS39Between 20 50%Equity MethodIAS28Greater than 50%ConsolidationIAS274Copyright 2014 Pearson Education. Account for financial asset investments5Copyright 2014 Pearson Education. Available-f

4、or-Sale Investments Share investments other than trading securities Non-current asset unless expected to be sold within next year Reported at fair market value Relevance to decision making Cost only used as initial amount when purchased Adjusted at balance sheet date From last carrying amount to cur

5、rent fair market value6Copyright 2014 Pearson Education. Adjusting Investment to MarketCopyright 2014 Pearson Education. 7JOURNALDateAccounts and explanationDebitCreditMarket Value Adjustments Unrealized gain on investmentAdjusted investment to marketJOURNALDateAccounts and explanationDebitCreditUnr

6、ealized loss on investment Market Value AdjustmentsAdjusted investment to marketIf market value is greater than carrying valueIf market value is less than carrying valueSelling an Available-for-Sale Investment Results in a realized gain or loss Difference between amount received and investment cost8

7、Copyright 2014 Pearson Education. JOURNALDateAccounts and explanationDebitCreditCashLoss on sale of investment Long-term investmentSold investmentIf cash cost, “Gain” would be creditedExercise 10-13ACopyright 2014 Pearson Education. 9JOURNALDateAccounts and explanationDebitCredit(a)Long-term investm

8、ent14,570 Cash (470 x $13)14,570Purchased investment(b)Cash799 Dividend revenue (470 X $1.70)799Market Value Adjustment2,350 Unrealized gain on investment2,350Adjusted investment to marketExercise 10-13ACopyright 2014 Pearson Education. 10JOURNALDateAccounts and explanationDebitCredit(d)Cash ($22 x

9、470)10,340Loss on sale of investment4,230 Long-term investment14,570Held-to-Maturity Investments Held-to-maturity investments are: non-derivatives financial assets with fixed or determinable payments, and fixed maturity Entity has intention and ability to hold to maturity Recorded at cost Often purc

10、hased at a premium or discount Amortized to account for interest revenue and bonds carrying amount Receive face value at maturity Accounted for using the amortized cost method11Copyright 2014 Pearson Education. Accounting for Held-to-Maturity InvestmentsCopyright 2014 Pearson Education. 12JOURNALDat

11、eAccounts and explanationDebitCredit4-1Long-term investment in bonds9,520 Cash9,520Purchased bond investments10-1Cash300 Interest revenue300Received semi-annual interest10-1Long-term investment in bonds Interest revenue60To amortize bond investment60$10,000 x 6% x 1/2($10,000 9,520)/48xx 6Amortizati

12、on of Held-to-Maturity InvestmentCopyright 2014 Pearson Education. 13Increases Long-Term Investment account as it reaches maturityRecords interest revenue earned from carrying amount increaseSummary of Accounting for InvestmentsCopyright 2014 Pearson Education. 14Type of Long-Term InvestmentAccounti

13、ng MethodInvestor owns less than 20% of investee sharesAvailable-for-saleInvestor owns between 20 50% of investee sharesEquityInvestor owns more than 50% of investee sharesConsolidationInvestor owns a long-term investment in bondsAmortized costUse the equity method for investments15Copyright 2014 Pe

14、arson Education. Accounting for Equity Method Investments Method used when investors owns between 20 50% of investees voting shares Investor has significant influence over investee operations Investment initially recorded at cost Investor records its share of investee net income and dividends 16Copy

15、right 2014 Pearson Education. Recording Investee Income and DividendsCopyright 2014 Pearson Education. 17JOURNALDateAccounts and explanationDebitCreditLong-term investment Equity-method investment revenueTo record investment revenueCash Long-term investmentReceived cash on equity method investmentSu

16、mmary of the Equity MethodCopyright 2014 Pearson Education. 18Equity-Method InvestmentOriginal CostShare of incomeShare of dividendsBalanceShare of lossesUnderstand consolidated financial statements19Copyright 2014 Pearson Education. Consolidated Subsidiaries Investor controls investee Owns more tha

17、n 50% of investees voting shares Investor can elect majority of board members Investor is called the parent company Investee is called the subsidiary20Copyright 2014 Pearson Education. Copyright 2014 Pearson Education. 21Many investors (the shareholders)ownThe parent corporationwho ownsThe subsidiar

18、yConsolidation Accounting Method of combining financial statements of all companies controlled by same shareholders Results is a single set of statements as if parent and its subsidiaries are one company Gives better perspective on total operations than individual statements Worksheet is used to com

19、bine parent and sub accounts Intercompany accounts are eliminated22Copyright 2014 Pearson Education. Goodwill and Non-controlling Interest23Copyright 2014 Pearson Education. Goodwill Arises when parent pays more to acquire a subsidiary than the fair value of its net assets Recorded as an intangible

20、assetNon-controlling interest Arises when parent company owns less than 100% of subsidiary stock Recorded as a separate account in the shareholders equity sectionIncome of Consolidated Entity24Copyright 2014 Pearson Education. Consolidated Income80% Subsidiarys incomeParents income20% Non-controllin

21、g interestsAccount for international operations25Copyright 2014 Pearson Education. Foreign Currencies & Exchange Rates International business often results in companies receiving or paying in a foreign currency Measure of one nations currency against another: Foreign currency exchange rate Conve

22、rsion of an item in one currency to another: Translation26Copyright 2014 Pearson Education. Factors Affecting Exchange RatesRatio of imports to exports If exports exceed imports, increase in demand drives up price of currency If imports exceed exports, supply increases and currency price fallsRate o

23、f return on capital markets If high, increases international investments and demand for currency Currencies are described as strong or weak27Copyright 2014 Pearson Education. Accounting for Foreign Currency Transactions28Copyright 2014 Pearson Education. JOURNALDateAccounts and explanationDebitCredi

24、tJun 10Accounts receivable2,000 Sales Revenue2,000Sale on account (1,000 x 2.00)Jul 10Cash2,100 Accounts receivable2,000 Transaction gain100Collection on account (1,000 x 2.10)JulCash 1,950Translation Loss50 Accounts receivables2,000Collection on account (1,000 x 1.95)Short Exercise 10-9Copyright 20

25、14 Pearson Education. 29JOURNALDateAccounts and explanationDebitCredit9-12Accounts receivable (500,000 x .36)180,000 Sales180,00010-18Cash (250,000 x .33)82,500Foreign currency transaction loss7,500 Accounts receivable (1/2 x 180,000)90,00010-1Cash (250,000 x .39)97,500 Accounts receivable (1/2 x 180,000)90,000 Foreign currency transaction gain7,500Foreign Currency Gains and Losses Gains and losses are netted and reported in the “Other” category on the Income Statement Losses can be avoided by: Only accepting or paying i