Exam 17: Investments

A correct valuation is

A debt security is transferred from one category to another. Generally acceptable accounting principles require that for this particular reclassification (1) the security be transferred at fair value at the date of transfer, and (2) the unrealized gain or loss at the date of transfer currently carried as a separate component of stockholders' equity be amortized over the remaining life of the security. What type of transfer is being described?

Securities which could be classified as held-to-maturity are

The accounting for fair value hedges records the derivative at its

Use the following information for questions 74 and 75. Landis Company purchased $2,000,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2014, with interest payable on July 1 and January 1. The bonds sold for $2,083,160 at an effective interest rate of 7%. Using the effective-interest method, Landis Company decreased the Available-for-Sale Debt Securities account for the Ritter, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums of $7,080 and $7,320, respectively. -At December 31, 2014, the fair value of the Ritter, Inc. bonds was $2,120,000. What should Landis Company report as other comprehensive income and as a separate component of stockholders' equity?

At February 1, 2015, Richman Company sold the Carlin bonds for $927,000. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2015 was $930,375. Assuming Richman Company has a portfolio of available-for-sale debt investments, what should Richman Company report as a gain (or loss) on the bonds?

Myers Company acquired a 60% interest in Gannon Corporation on December 31, 2014 for $1,575,000. During 2015, Gannon had net income of $1,000,000 and paid cash dividends of $250,000. At December 31, 2015, the balance in the investment account should be

Which of the following is not generally correct about recording a sale of a debt security before maturity date?

Companies that attempt to exploit inefficiencies in various derivative markets by attempting to lock in profits by simultaneously entering into transactions in two or more markets are called

Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the

When an investment in an available-for-sale security is transferred to trading because the company anticipates selling the stock in the near future, the carrying value assigned to the investment upon entering it in the trading portfolio should be

At December 31, 2015, Atlanta Company has a stock portfolio valued at $80,000. Its cost was $66,000. If the Securities Fair Value Adjustment (Available-for-Sale) has a debit balance of $4,000, which of the following journal entries is required at December 31, 2015?

Companies may not use the fair value option for investments that follow the equity method of accounting.

When a company has acquired a "passive interest" in another corporation, the acquiring company should account for the investment

On May 1, 2014, Kirmer Corporation purchased $900,000 of 12% bonds, interest payable on January 1 and July 1, for $843,900 plus accrued interest. The bonds mature on January 1, 2020. Amortization is recorded when interest is received by the straight-line method (by months and round to the nearest dollar). (Assume bonds are available for sale.) Instructions (a) Prepare the entry for May 1, 2014. (b) The bonds are sold on August 1, 2015 for $565,000 plus accrued interest. Prepare all entries required to properly record the sale.

Under IFRS, impairment charges related to held-for-collection debt securities may be reversed.

The accounting profession has concluded that an investment of more than 50 percent of the voting stock of an investee should lead to a presumption of significant influence over an investee.

The Unrealized Holding Gain/Loss-Equity account is reported as a part of other compre-hensive income.

Companies report trading securities at fair value, with unrealized holding gains and losses reported in net income.

On January 2, 2014, Sloan Company issued a 5-year, $9,000,000 note at LIBOR with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 6.8%Sloan Company decides it prefers fixed-rate financing and wants to lock in a rate of 6%. As a result, Sloan enters into an interest rate swap to pay 7% fixed and receive LIBOR based on $9 million. The variable rate is reset to 7.4% on January 2, 2015. Instructions (a) Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2014. (b) Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2015.