Exam 7: Accounting for Debt and Share Investments

Debt investments

Investments in debt securities are always current assets.

The term "equity security" refers to the guarantee your broker gives you concerning an investment that was just made for you.

Capcom paid $160,000,plus a brokerage commission of $350,to purchase Carrefour Corp bonds as a long-term investment.The 8% bonds had a par value of $145,000 and pay interest semiannually.The market interest rate is 9%.Prepare the journal entry to record the receipt of the first semiannual interest payment.

A company that owns 100% of the outstanding shares of a subsidiary is required to take over the subsidiary's assets,cancel the subsidiary's shares,and merge the subsidiary into the parent.

Non-strategic investments are usually

Sygnio purchased 1,700 shares of Toniq Corp.common shares for $122,250 on July 15 of this year.This purchase represented 1% of Toniq Corp's outstanding common shares and being held by the company for a short period.Prepare the journal entry to record the purchase.

Explain how long-term debt securities are initially accounted for.

On December 31,Year 1,Condax Corp purchased 8,000 shares of Opentech Corp's common shares.This purchase represented 35% of Opentech's outstanding shares and gave Condax significant influence over Opentech's management and operations.On October 11,Year 2,Opentech declared and paid cash dividends of $30,000.On December 31,Year 2,Opentech reported profit of $190,000 for the year.Prepare the Year 2 journal entries Condax Corp should prepare to account for its investment in Opentech Corp.

Purchases of long-term debt investments are never initially recorded at fair value.

Under IFRS,non-strategic debt investments are initially recorded using

Investments in shares are the same as debt investments.

Eastjet owns Flair Corp bonds as a short-term equity investment with a carrying value of $75,000.The current market value is $68,500.Eastjet should record a

Oberlo paid $180,000 to purchase CAE Corp bonds as a long-term investment.The 7% bonds had a par value of $180,000 and pay interest semiannually.Prepare the journal entry to record the transaction.

Explain how significant influence or investments in associates are reported on the balance sheet and income statement.

A decrease in the fair value of a security that has not yet been confirmed by the sale of the security is called a(n)

"Debt investment" and "debt security" are interchangeable terms.

Accounting for long-term investments in equity securities with controlling influence uses the

The sale of a short-term equity investment requires a debit to cash and a credit to short-term investments,with any resulting differences recognized as gains or losses.

As a long-term investment,Camex Inc.paid $800,000 (par value)for Simple Bank bonds.The bonds pay 5.5% interest semiannually on September 1 and March 1.Prepare the journal entries for the following transactions.Round all values to the nearest dollar. (1)Purchase on September 1,2020. (2)Year-end adjusting entry,December 31,2020. (3)Receipt of semiannual interest payment March 1,2021. (4)Redemption of the bonds at maturity.