Exam 18: Investing Assets

If an investor has significant influence over an investee,but doesn't control the decision that are made,the investor must use the equity method to account for this investment.

If a company deems an asset to be impaired,it still may not record an impairment loss.

Ryan Corporation purchased 10,000 shares of Acme Stock.It plans to hold them for a short time and then sell them at a gain.It should classify these securities as ________.

Where are changes in fair value for available for sale securities reported?

On June 1,Year 1,Broadway Financing agrees to loan Choctaw Investment Group $800,000 on a non-interest bearing note for four years.The current market interest rate is 11%. Required: 1.What are the proceeds of the note? 2.Prepare the journal entry to record the issuance of the note. 3.Prepare the adjusting journal entries for December 31 Year 1 and Year 2. 4.What is the carrying value of the note at the end of Year 2?

Eagle Exporters purchased 40,000 of the 100,000 outstanding shares of Giant Distributors for $2,000,000.Eagle has significant influence over Giant and will account for this investment using the equity method.During the year,Giant declared dividends of $140,000 and reported Net Income of $800,000.What is the balance in the Investment in Giant account at year end?

If an investee's net assets are not equal to their fair value,an additional adjustment is required under the equity method of accounting for investments.

Trader Trust accepts a $500,000 non-interest bearing 10-year note from Coffee Co.in exchange for Cash on 1/1/16.Coffee Co.promises to repay $500,000 at maturity.The market rate on 1/1/16 was 4%.What is the carrying value of this note on the balance sheet on 12/31/16?

What is the initial reporting basis for all investment securities?

When must a company generally elect the fair value option for reporting assets?

Refer to Black Corporation: Assume that these securities are trading securities.How will these securities be classified on the balance sheet at December 31 of the current year?

Refer to Bosworth Corporation.What will be the note balance at December 31,Year 1?

Ewok Enterprises recently elected the fair value option to account for its investment in Yoda Inc.Ewok purchased the shares for $210,000 and the shares are currently trading for $195,000 at year-end.What is the carrying value of this investment on the balance sheet of Ewok?

For investing assets reported at fair value,companies disclose information to enable users to assess the fair value estimates and reasonableness of assumptions made in determining fair value.How is this accomplished?

Available-for-sale debt securities are reported at fair value,with unrealized gains or losses reported in other comprehensive income.

Companies report securities based on a fair value hierarchy in which Level 3 is the most reliable estimates of inputs used and Level 1 fair value input estimates require the most judgment.

IFRS allows companies to elect the fair value option for all investment except ________.

Refer to Sheppard Corporation.Assume that Sheppard purchased 25% of Meredith's common stock for $62,000.All other facts remain the same.What would be the balance in the investment account as of December 31,2016?

L & J purchased common shares of Company A and B for $10,000 and $12,000,respectively on 12/15.L & J intends to sell these securities within 30 days.At 12/31,Investments in Company A & B had a fair value of $9,000 and $15,000,respectively.Assuming an existing $1,500 credit balance in Fair Value Adjustment - Trading Equity Securities,what is the unrealized gain or loss for these securities and how is it reported?

Investments in debt and equity securities that cannot be readily classified in the other reporting categories are classified as ________.