Textbook Notes (363,339)
United States (204,494)
Accounting (68)
ACC 311 (21)
Chapter Appendix A

ACC 311 Chapter Appendix A: Appendix A Notes

3 Pages
Unlock Document

University of Texas at Austin
ACC 311
Gretchen Charrier

Appendix A: Reporting and Interpreting Investments in Other Corporations ● Investing funds in stocks and bonds of other companies: Managers are not interested in influencing or controlling other companies ● Accounting for investments in securities ○ No influence or control: <20% (Fair value method) ■ Passive Investments: Company has extra cash and wants to earn a return on the idle funds ● Passive if investing company owns <20% of outstanding voting shares of other company ● Fair value method is used to measure and report investments ○ Fair Value Method: Reports securities at their current market value (the amount that would be received in an orderly sale) ○ Why to report passive investments at fair value ■ Relevance: Current fair value is best estimate of cash that could be generated by the sale of these securities ■ Measurability: Accountants record only items that can be measure with a high degree of reliability ○ Unrealized Holding Gains (Losses): Amounts associated with price changes of securities that are currently held ■ Trading securities ● Held for the purpose of selling in the near future ● Unrealized holding gain/loss adjustments are recorded in income statement and closed to retained earnings ● Classified as short term, current assets ■ Available for sale securities ● All passive investments other than trading securities and debt held to maturity (classified as either short term or long term) ● Not held primarily for the purpose of selling in the near future ● Intent is to earn a return on the funds invested ● Unrealized holding gain/loss adjustments are recorded in stockholders' equity section of balance sheet as accumulated other comprehensive income (AOCI) ● Purchase of Securities ○ Debit investments in AFS securities ○ Credit cash ● Dividends Earned ○ Debit cash ○ Credit dividend revenue ○ Same for both TS and AFS ● Year-End Valuation ○ Report passive investments at fair value at end of accounting period ○ Adjusting Entry ■ Fair Value - Boo
More Less

Related notes for ACC 311

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.