Current Attempt in ProgressX Your answer is incorrect.A corporation recognizes a gain or lossO only when bonds are converted into common stock.O when bonds are converted into common stock and when they are redeemed before maturity.O only when bonds are redeemed before maturity.O when bonds are redeemed at or before maturity.eTextbook and MediaSave for LaterAttempts: 1 of 2 usedSubmit Answer&689уg hbinm

Redemption of Bond: When interest rates fall dramatically, bond issuers are forced to redeem their…

Answered: A corporation recognizes a gain or loss…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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nEED IN 10 MINUTES 9. On January 1, 20x1, an entity purchased marketable equity securities for P2,500,000. The entity paid commission and taxes of P190,000. The equity securities do not qualify as financial asset held for trading. The entity made irrevocable election to present unrealized gain and loss in other comprehensive income. The securities have a market value of P2,600,000, and P2,750,000 on December 31, 20x1 and December 31, 20x2. On July 1, 2022, half of the securities are sold for P1,400,000. On July 1, 2022, the net increase/ decrease in retained earnings account is (sample answer: 10,500 increase or 10,500 decrease)
1) Equity securities can be classified as either current assets or long-term assets. Regardless of its classification, equity securities are always revalued to fair value at the end of the period. (True/False) 2) Debt securities which are classified as held-to-maturity securities are valued at amortized costs. Amortized costs is synonymous with carrying value and book value. (True/False) 3) ABC Company owns 60% of the stock of XYZ Company and prepares consolidated financial statements. The rationale for preparing consolidated financial statements is the economic entity assumption and comparability. (True/False) 4) XYZ Corporation declares and distributes a cash dividend that is a result of current earnings. Under both the fair value and equity method, the receipt of these dividends will be recorded as dividend revenue by the investor. (True/False) 5) The Fair Value Adjustment account has a normal debit balance. (True/False) 6) Cash dividends paid to preferred shareholders will…
[S1] When the entity issues a long-term debt instrument, it exposes itself to solvency risk. [S2] When the board of directors agreed to regularly issue stock dividends, it faces liquidity risk. *a. Both are true.b. Both are false.c. Only S2 is true.d. Only S1 is true.
[S1] Share warrants are often attached to debt instruments to entice creditors to also become ordinary shareholders especially when the entity would be unable to pay interests. [S2] An entity needing a large sum of financing would prefer issuing bonds with share warrants over bonds with conversion rights. * a. Only S1 is true.b. Only S2 is true.c. Both are true.d. Both are false.
2. On January 1, 20x1, an entity purchased marketable equity securities for P2,500,000. The entity paid commission and taxes of P190,000. The equity securities do not qualify as financial asset held for trading. The entity made irrevocable election to present unrealized gain and loss in other comprehensive income. The securities have a market value of P2,600,000, and P2,750,000 on December 31, 20x1 and December 31, 20x2. O n July 1, 2022, half of the securities are sold for P1,400,000. On December 31, 20x2, how much shall be shown in the statement of comprehensive income as unrealized gain/ loss? (sample answer: 10,500 UG or 10,500 UL)
All equity securities and investments in debt securities that are intended to be sold in the near term are classified as held-to-maturity securities. trading securities. available-for-sale securities. none of these choices. 2. Any change in the fair value of trading securities is reported on the income statement as part of net income. reported as part of other comprehensive income in the shareholders' equity section of the balance sheet. ignored; only the amortized cost is reflected in the financial statements. reported as a cash outflow in the investing activities section of the statement of cash flows. 3. A minority active investment with significant influence occurs when the investor owns between 10% and 20% of the voting common stock of the investee. over 50% of the voting common stock of the investee. between 20% and 50% of the voting common stock of the investee. over 50% of the preferred stock of the investee.
Match each of the items below with its most appropriately-related “letter” classification. (“Letter” classification may be used more than once, or not at all.)A. Fair Value Adjustment G. Available-for-sale debt securities B. Statement of Cash Flows H. Equity holdings between 20% and 50% C. Trading debt securitiesI. Temporary differences, deferred tax assetD. Equity holdings less than 20% J. Permanent differences E. Held-to-maturity debt securities K. Temporary differences, deferred tax liability F. Statute of Limitations L. Equity holdings more than 50% ____ 1. Premiums paid on life insurance of officers (company is the beneficiary).____ 2. Amortized cost; unrealized holding gains or losses not recognized; interest when earned.____ 3. Consolidation of financial statements; parent and subsidiary company income or loss combined.____ 4. Estimated future warranty costs.____ 5. Represents the increase in taxes refundable (or saved) in future yearsas a result of deductible temporary…
According to AC Topic 320, 'Investments - Debt and Equity Securities', all of the following changes in circumstances may cause an entity to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future, EXCEPT for: O a. Evidence of a significant deterioration in the issuer's creditworthiness O b. Changes in market interest rates and related changes in the security's prepayment risk Oc. A change in tax law that eliminates or reduces the tax-exempt status of interest on the debt security O d. A major business combination or major disposition that necessitates the sale or transfer of held-to-maturity securities to maintain the entity's existing interest rate risk position or credit risk policy
1. Treasury stock is presented on the balance sheet as an asset. a liability. a reduction to equity. a memorandum in the notes. 2. Under the cost method, when the corporation reacquires its capital stock, it assumes it will reissue rather than retire the stock. debits Treasury Stock for the price paid. credits Cash for the price paid. does all of these choices
Which method should be used to account for a 16 % ownership in another company's voting stock , assuming the company buying the stock wants to control the decisions of the other company ? Equity Trading Held - to - maturity Available - for - sale How should a company classify debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses that are included in long - term investments ? trading debt securities never - sell debt securities Oheld - to - maturity debt securities available - for - sale debt securities Under the equity method of accounting for investmentswhat must the company purchasing the shares record each period? percentage of net income ) reported and dividends paid Its percentage of estimated earnings and dividends declared The change in market value of the shares owned NothingNo entries are made in the equity method except at the time of purchase. What effect will transferring investments from the…
dont use chatgpt. Bonds issued by corporations and exposed to default risk are classified as A. corporation bonds B. default bonds C. risk bonds D. zero risk bonds
Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the above

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A corporation recognizes a gain or loss O only when bonds are converted into common stock. when bonds are converted into common stock and when they are redeemed before maturity. only when bonds are redeemed before maturity. when bonds are redeemed at or before maturity.