ACC 925 Chapter Notes - Chapter 5: Annual Percentage Rate, Debits And Credits, Book Value

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rubyleopard335

12 Oct 2016

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Short-term investments (marketable securities): are investments that a company plans to hold for one year or less. Held-for-trading investments: to hold an item for a short time and then sell it for more than its cost. Unrealized gain and losses: a(cid:374) i(cid:374)(cid:448)est(cid:373)e(cid:374)ts" fair (cid:448)alue is the a(cid:373)ou(cid:374)t a (cid:449)illi(cid:374)g (cid:271)uy (cid:449)ould pay a (cid:449)illi(cid:374)g seller to acquire the investment. It is unrealized because cgi has not yet sold the investment. It is a gain because the fair value (102,000) is greater than cgi"s investment cost. A gain has the same effect on owners" equity as a revenue. If it"s a loss, then it"s reported as an expense and the entry it reversed. Realized gains and losses: a realized gain or loss occurs only when the investor sells and investment. Realized gain - sale price greater than investment carrying amount. Realized loss - sale price less than investment carrying amount.

Related Questions

Available-for-Sale Securities

At the beginning of 2013, Ace Company had the followingportfolio of investments in available-for-sale securities (commonstock):

Security	Cost	12/31/12 Fair Value
A	$24,300	$28,800
B	28,400	27,300
Totals	$52,700	$56,100

During 2013 the following transactions occurred:

May 3	Purchased C securities (commonstock) for $11,300.
July 16	Sold all of the A securities for$28,800.
Dec. 31	Received dividends of $700 on the Band C securities, for which the following information wasavailable:

12/31/13 Fair Value
B	$30,400
C	14,200

1. Prepare journal entries to record the preceding information.For compound entries, if an amount box does not require an entry,leave it blank.

2013	investments in available for sale securities	$?????
May 3	cash		$?????

July 16	cash	$?????
sale	investments in available for sale securities		$?????
	gain on sale of available for sale securities		$?????

July 16	unrealized holding gain/loss: available for salesecurities	$?????
adj	allowance for change in fair value of investment		$?????

Dec 31	cash	$?????
divd	dividend income		$?????

Dec 31	allowance for change in fair value of investment	$?????
adj	unrealized holding gain/loss: available for salesecurities		$?????

2. What is the balance in the Unrealized Holding Gain/Lossaccount on December 31, 2013?

$??????

beigeelk15

posting for sec times any incomplete work will bereported answer all 2 parts investment 1 to 7 and finacial statmentand valution 1 to 6

You are working for The Wellington Company on temporaryassignment while one of the accountants is on family leave. Youhave been asked to review the companyâs investment journal entriesand provide necessary information to the accountant preparing thefinancial statements.

PAGE 8

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	DEBIT	CREDIT	ASSETS	EQUITY
1	Jan. 17	Investments-Red Rock Co. Stock	38,500.00		?
2		Cash		38,500.00	?
3	Feb. 5	Investments-Sunset Village Bonds	35,000.00		?
4		Interest Receivable	300.00		?
5		Cash		35,300.00	?
6	23	Investments-Mays and Co. Stock	26,250.00		?
7		Cash		26,250.00	?
8	Mar. 31	Cash	350.00		?
9		Interest Receivable		300.00	?
10		Interest Revenue		50.00		?
11	Apr. 6	Investment in Minions Corp. Stock	175,000.00		?
12		Cash		175,000.00	?
13	30	Cash	750.00		?
14		Dividend Revenue		750.00		?
15	Jul. 1	Cash	18,690.00		?
16		Loss on Sale of Investment	2,520.00			?
17		Interest Revenue		210.00		?
18		Investments-Sunset Village Bonds		21,000.00	?
19	Aug. 14	Cash	41,300.00		?
20		Gain on Sale of Investments		1,800.00		?
21		Investments-Harding Construction Stock		39,500.00	?
22	27	Cash	3,500.00		?
23		Investment in Minions Corp. Stock		3,500.00	?
24	Sep. 22	Cash	29,750.00		?
25		Gain on Sale of Investments		3,500.00		?
26		Investments-Mays and Co. Stock		26,250.00	?
27	30	Cash	140.00		?
28		Interest Revenue		140.00		?
29	Nov. 1	Investment in Minions Corp. Stock	15,750.00		?
30		Income of Minions Corp.		15,750.00		?
31	Dec. 31	Unrealized Loss on Available-For-Sale Investments	3,275.00			?
32		Valuation Allowance for Available-For-Sale Investments		3,275.00	?
33	31	Valuation Allowance for Trading Investments	2,150.00		?
34		Unrealized Gain on Trading Investments		2,150.00		?

Investments

Review the journal entries on The Wellington Company panel thenanswer the following questions.

1.	Which item is likely to be atrading security? Mays and Co. Why?
2.	How are brokerage commission feestreated on stock sales vs. stock purchases?
3.	Based on these journal entries,what is the companyâs investment in Sunset Village bonds at the endof the year?
4.	The journal entry on Aug. 27 mostlikely shows
5.	As an investment, bonds are alwayscategorized as
6.	What is the companyâs investment inMinions Corp. at the end of the year?

7. Which of the following investments are likely to beavailable-for-sale securities? Check all that apply.

Harding Construction stock

Mays and Co. stock

Cannot be determined

Red Rock Co. stock

Sunset Village bonds

Minions Corp. stock

Financial Statements and Valuation

The accountant preparing the financial statements has asked youto provide the fair value as of the end of the year for theinvestments. Present the information as it would be shown on thefinancial statements. Last year, The Wellington Company reportedcosts of $68,000 in trading investments and $82,000 inavailable-for-sale investments. Refer to the journal entries shownon The Wellington Company panel. Assume that all investments soldduring this year were trading investments and that purchases duringthe year were new investments.

1. Select the correct label for each line and fill in theamount. In classifying the investments, choose a categorizationwhich seems most likely, given the pattern of transactions in thejournal entries. Enter all amounts as positive numbers. If anamount box does not require an entry, leave it blank.

Trading Securities

Available-For-Sale Securities

	2. Where on the balance sheet dotrading securities appear?
	3. Where is the gain or loss fromthe change in value of available-for-sale securities reported inthe financial statements?
	4. Where are held-to-maturitysecurities reported? Based on the journal entries for this year,does the company have any held-to-maturity securities?
	5. Where are securities held forstrategic reasons reported in the financial statements when usingthe equity method? Based on the journal entries for this year, doesThe Wellington Company have any equity securities?

6. Which of the following items does not affect net income?Check all that apply.

only unrealized gains or losses for all investments

realized loss on available-for-sale securities

realized gain on trading securities

none of these answers is correct

both gains and losses of any sort for all investments

unrealized loss on trading securities

unrealized gain on available-for-sale securities

During 2017 the Lung Association received a contribution of marketable securities that were to be placed in a permanent endowment fund. Neither donor stipulations nor applicable state law requires that capital gains or increases in value be added to the endowment principal. The income from the securities was to be restricted to research in pulmonary diseases. The following schedule indicates the value of the securities as of the date of receipt (labeled "cost"), the fair value at December 31, 2017, and the unrealized gains and losses of the year.

Endowment Portfolio as of December 31, 2017 (in thousands)

Cost Fair Value Unrealized Gain (Loss)

Northwest Industries $260 $275 $15

Campbell Corp. 317 304 (13)

St. Regis, Inc. 141 171 30

$718 $750 $32

1. Prepare a journal entry to record the unrealized net gain during the year. Be sure to indicate the type of fund+(unrestricted, temporarily restricted, or permanently restricted) in which the entry would be made. Assuming no other transactions and no other assets in the relevant funds, show how the investments would be reported on the hospital's year-end 2017 statement of financial position.

2. During 2018, the hospital sold Northwest Industries for $280. Prepare appropriate journal entries to record the sale. Credit the gain to the same account in which you credited the unrealized appreciation of 2017.

3. As of December 31, 2018, the market value of Campbell Corp. had increased to $320; that of St. Regis, Inc., to $180. Prepare a journal entry to record the unrealized gain during the year. Show how the association would report the investment portfolio on its December 31, 2018, statement of financial position. You may combine the cash and securities of each type of fund into a single account.

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ACC 925 Chapter Notes - Chapter 5: Annual Percentage Rate, Debits And Credits, Book Value

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