A corporation has invested $50,000 in the securities of other companies. At the end of the year, that corporation’s portfolio has a market value of $52,000. Describe where these securities would be shown on the annual financial statements and at what amount under each of the conditions described. 1. The investment is classified as trading securities. 2. The investment is classified as available for sale. 3. The investment is classified as held to maturity.

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Answer 1

Textbook Question

Chapter 10B, Problem 1YT

A corporation has invested $50,000 in the securities of other companies. At the end of the year, that corporation’s portfolio has a market value of $52,000. Describe where these securities would be shown on the annual financial statements and at what amount under each of the conditions described.

1. The investment is classified as trading securities.
2. The investment is classified as available for sale.
3. The investment is classified as held to maturity.

Expert Solution & Answer

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

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Students have asked these similar questions

For several years Fister Links Products has held shares of Microsoft common stock, considered by the company to be securities available-for-sale. The shares were acquired at a cost of $500,000. Their fair value last year was $610,000 and is $670,000 this year. At what amount will the investment be reported in this year’s balance sheet? What adjusting entry is required to accomplish this objective?

In January 2022, the management of Handley Corporation, a publicly-traded company, decides that it has sufficient cash to purchase some debt and equity securities to be held as trading investments. During the year, the following transactions occurred. Feb. 1 Purchased 1,100 shares of NJF common shares for $48,400. Mar. 1 Purchased 500 shares of SEK common shares for $20,000. Apr. 1 Purchased 73 $1,000, 8% CRT bonds for $74,200. Interest is receivable semi-annually on April 1 and October 1. July 1 Received a cash dividend of $0.60 per share on the NJF common shares. Aug. 1 Sold 180 shares of NJF common shares at $39.00 per share. Sept. 1 Received $2 per share cash dividend on the SEK common shares. Oct. 1 Received the semi-annual interest on the CRT bonds. Oct. 1 Sold the CRT bonds for $79,240. At December 31, Handley’s fiscal year end, the fair values of the NJF and SEK common shares were $38 and $29 per share, respectively. Record the above…

Mumford Corporation invested $30,000 in marketable securities at various times during the year. On December 9, it sold some of these investments for $10,000, and on December 18, it sold more of these investments for $5,000. The securities sold on December 9 had cost the company $7,000, whereas the securities sold on December 18 had cost the company $6,000. a. Record the purchase of marketable securities during the year. b. Record the sale of marketable securities on December 9. c. Record the sale of marketable securities on December 18. d. Record the necessary fair value adjustment on December 31, assuming that the market value of the company’s remaining unsold securities was $20,000.

Answer 2

Textbook Question

Chapter 10B, Problem 1YT

A corporation has invested $50,000 in the securities of other companies. At the end of the year, that corporation’s portfolio has a market value of $52,000. Describe where these securities would be shown on the annual financial statements and at what amount under each of the conditions described.

1. The investment is classified as trading securities.
2. The investment is classified as available for sale.
3. The investment is classified as held to maturity.

Expert Solution & Answer

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

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Answer 3

Textbook Question

Chapter 10B, Problem 1YT

A corporation has invested $50,000 in the securities of other companies. At the end of the year, that corporation’s portfolio has a market value of $52,000. Describe where these securities would be shown on the annual financial statements and at what amount under each of the conditions described.

1. The investment is classified as trading securities.
2. The investment is classified as available for sale.
3. The investment is classified as held to maturity.

Expert Solution & Answer

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

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Answer 4

Textbook Question

Chapter 10B, Problem 1YT

A corporation has invested $50,000 in the securities of other companies. At the end of the year, that corporation’s portfolio has a market value of $52,000. Describe where these securities would be shown on the annual financial statements and at what amount under each of the conditions described.

1. The investment is classified as trading securities.
2. The investment is classified as available for sale.
3. The investment is classified as held to maturity.

Expert Solution & Answer

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

Answer 8

Expert Solution & Answer

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Explain that where the given securities would be shown on the annual financial statements and state the amount under each of the conditions explained.

Answer 12

Explanation of Solution

Situation 1:

In this situation, the securities will be shown in the current asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain on the income statement.

Situation 2:

In this situation, the securities will be shown depending on a company’s intent, either the current asset or the long-term asset section of the balance sheet at a value of $52,000. The write-up will be balanced with a $2,000 unrealized gain that will go directly to equity, as part of accumulated other comprehensive income.

Situation 3:

In this situation, the securities will be shown at their cost of $50,000 in the long-term asset section of the balance sheet (except the debt securities are maturing in the next year, in which case they would be reported under the current assets).

Answer 13

Ch. 10B - A corporation has invested 50,000 in the...Ch. 10B - Investments. (LO 6). In January 2010, Bowers...Ch. 10B - Prob. 2SEB Ch. 10B - Prob. 3EA Ch. 10B - Prob. 4EA Ch. 10B - Prob. 5EB Ch. 10B - Prob. 6EB

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