Exam 13: Investments and Fair Value Accounting

What is comprehensive income? How is it calculated? What are some examples of items included in other comprehensive income? Where is comprehensive income reported?

Investments in bonds that management intends to hold to maturity are called trading securities.

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

The cost and fair value of the trading securities held by AdBrand Company as of December 31, 2012 are as follows: Required: (1) Complete the table above to find the total cost and fair value for the company's trading securities portfolio. (2) Calculate and record the required December 31, 2012 adjustment. (3) Explain how the adjustment from step (2) is reported on AdBrand's 2012 financial statements.

The amortization of discounts or premiums are recorded as part of interest income on the income statement.

(1) Discuss factors contributing to the trend to fair value accounting. (2) What are some of the disadvantages associated with using fair value?

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except:

Which of the following statements below is not a reason a company may purchase another company's stock?

Long-term investments are held for all of the listed reasons below except

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

Trading securities should be reported on the financial statements at fair market value.

Temporary investments such as in trading securities are

Any gains or losses on the sale of bonds normally would be reported in the Other Income (Loss) section of the income statement.

Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

Investment in certificates of deposit and other securities that do not change in value are reported in the balance sheet as:

Newville Corporation reported net income of $50,000 in 2015. They have 10,000 shares of $100 par, 6% preferred stock and 50,000 shares of $2 common stock outstanding. During 2012 Newville paid the preferred stockholder's a $6 per share dividend and also paid $30,000 to common shareholders. The market value of Newville's stock is: Preferred - $105 and Common - $10. (1) Calculate Newville's dividend yield. (2) Why does the dividend yield vary widely across firms?

On January 1, 2012, Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, 2012, the cost of the available-for-sale securities was $48,700, and the fair value was $39,200. Prepare the adjusting entry to record the unrealized gain or loss for available-for-sale investments on December 31, 2012.

The company whose more than 50% stock is owned by the another company is called the

Mangrill, Inc. reported net income for the year ending December 31, 2012 of $483,500. Dividends paid during the year totaled $42,900. The company holds available-for-sale securities with an original cost of $162,000 and a fair value of $171,000 at the end of the year. They also hold trading securities with an original cost of $150,000 and a fair value of $147,000. Retained Earnings on January 1, 2012 was $736,400 and Accumulated Other Comprehensive Income on January 1, 2012 was $16,200. Required: Calculate the following balances to be reported in the financial statements dated December 31, 2012. (1) Valuation Allowance for Available-for-Sale securities (2) Comprehensive Income (3) Retained Earnings (4) Accumulated Other Comprehensive Income

The amount of interest paid when buying a bond as an investment should be credited to Interest Revenue.