70-252 Study Guide - Comprehensive Midterm Guide: Current Liability, Accounts Payable, Net Income
Document Summary
Types of investments: debt instruments investments in government debt, corporate bonds, convertible debt, and commercial paper, equity instruments represent ownership interests in companies. Types of companies that have investments: motivations: Information for decision-making: type of instrument (debt vs. equity, management"s intent, ability to reliability measure instrument"s fair value, company strategy. Transfer total realized to net income (recycling) or to retained earnings. Cost/amortized cost model: applications for cost model. Recognize the cost of the investment at fair value. Recognize dividend income when entity can receive the dividend. Derecognize disposed shares and report a gain/loss on disposal in net income: applications for amortized cost model. Recognize cost of investment at fair value. Recognize interest income as it is earned, amortizing ant discount/premium. Bring accrued interest and discount/premium amortization up to date. Derecognize investment and report a gain/loss on disposal in net income: income under amortized cost model. If it is interest-bearing, party receives all the interest since the last payment date.