Exam 13: Marketable Securities and Derivatives

The counter-argument for (1) not measuring held-to-maturity debt securities at amortized cost and (2) recognizing most changes in fair value during the contractual term of the debt include any change in the _____ could change the investor's willingness or ability to hold the securities until maturity.

Management can sell securities with unrealized holding gains (or losses) and transfer through net income to Retained Earnings the entire unrealized holding gain (or loss)-that is, management can affect the timing of gain or loss recognition in net income for both securities available-for-sale and trading securities.

Credit Company Information concerning Credit Company's portfolio of debt securities at May 31, Year 6, and May 31, Year 7, is presented below.All of the debt securities were purchased by Credit Co.during June, Year 5.Prior to June, Year 5, Credit Co.had no investments in debt or equity securities. As of May 31, Year 6 Amortized Cost Fair Value CZ Company bonds \ 164,526 \ 168,300 Jerry Industry bonds 204,964 205,200 Barley Inc. bonds 305,785 285,200 \6 75,275 \6 58,700 As of May 31, Year 7 Amortized Cost Fair Value CZ Company bonds \ 152,565 \ 147,600 Jerry Industry bonds 193,800 204,500 Barlev Inc. bonds 289,130 291,400 \6 35,495 \6 43,500 a. Assuming that the above securities are properly classified as available-for-sale securities under U.S.GAAP, how would the unrealized holding gain or loss as of May 31, Year 7, be recognized? b. Assuming that the above securities are properly classified as held-to-maturity securities under U.S.GAAP, how, if at all, would the unrealized holding gain or loss as of May 31, Year 7, be recognized?

What are elements of a derivative?

When accounting for a fair value hedge of a recognized asset or liability, on the date a firm enters the derivative contract and designates that contract as a fair value hedge,

Firms can elect the fair value option for the following items: (1) bonds held to maturity, (2) available-for-sale securities, and (3) cash flow hedges.Which of the following is/aretrue?

The U.S.GAAP and IASB require that firms record derivatives on the balance sheet date at

How does U.S.GAAP and IFRS require firms to classify marketable securities?

When accounting for a cash flow hedge of a recognized asset or liability, which of the following is/are true?

Which of the following can be a counterparty in a derivative transaction?

The accounting for fair value hedges is similar under both U.S.GAAP and IFRS. Which of the following is/aretrue?

Firms include trading securities in _____ in the _____ section of the _____.

Which of the following would most likely not be classified as Investment in Securities appearing between the Current Assets and the Property, Plant and Equipment sections of the balance sheet?

Armul Insurance acquired shares of Bannock's common stock on December 28, 2013, for $400,000 and classified them as trading securities.The fair value of these securities on December 31, 2013, was $402,000.Armul Insurance sold these shares on January 3, 2014, for $405,000. a. What is the journal entry to record acquisition of trading securities on December 28, 2013? b. What is the journal entry to measure trading securities at fair value and recognize unrealized holding gain on December 31, 2013? c. What is the journal entry to record the sale of trading securities at a gain on January 3, 2014? d. What is the total income from the purchase and sale of the securities?

According to U.S.GAAP, firms holding debt securities with a positive intent and ability to hold to maturity display such securities in the Investments section of the balance sheet at

A firm records debt securities purchases at the acquisition cost.The firm must use the _____ method to amortize any difference between acquisition cost and maturity value over the life of the debt as an adjustment to _____

The firm's purpose for holding certain securities may change, requiring it to transfer securities from one category to another.The firm transfers the securities at _____ at the time of the transfer.

For financial reporting purposes, acquisition and disposition of trading securities are usually _____ activities.

Which of the following is/are true?

What disclosures about marketable securities are required by U.S.GAAP?