INTERMEDIATE ACCT CONNECT ACCESS
16th Edition
ISBN: 9781264025763
Author: SPICELAND
Publisher: INTER MCG
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Chapter 12, Problem 12.18BE
To determine
Available-for-sale (AFS) securities: These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.
Other-than-temporary (OTT) impairment: When the market value of an investment declines to a value lower than its cost, it is referred to as OTT impairment.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To explain: The reporting of OTT impairment by Corporation L
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D1.
Account
Problem 15-9 (AICPA Adapted)
During 2021, Garr Company purchased marketable equity
securities as a trading investment.
For the year ended December 31, 2021, the entity recognized
an unrealized loss of P200,000.
There were no security transactions during 2022. The entity
provided the following information on December 31, 2022:
Market value
Security
A
B
Cost
2,450,000
1,800,000
4,250,000
2,300,000 (10000)
900.000
2,700,000
5,000,000
In the 2022 income statement, what amount should be
reported as unrealized gain or loss?
a. Unrealized gain of P950,000
b. Unrealized loss of P950,000
c. Unrealized loss of P750,000
Unrealized gain of P750,000
d.
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Chapter 12 Solutions
INTERMEDIATE ACCT CONNECT ACCESS
Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5QCh. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Under IFRS No. 9, which reporting categories are...Ch. 12 - Prob. 12.12QCh. 12 - Do U.S. GAAP and IFRS differ in the amount of...Ch. 12 - Under what circumstances is the equity method used...Ch. 12 - The equity method has been referred to as a...Ch. 12 - In the application of the equity method, how...Ch. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - How does IFRS differ from U.S. GAAP with respect...Ch. 12 - What is the effect of a company electing the fair...Ch. 12 - Define a financial instrument. Provide three...Ch. 12 - Some financial instruments are called derivatives....Ch. 12 - (Based on Appendix 12A) Northwest Carburetor...Ch. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.15PCh. 12 - Prob. 12.2DMPCh. 12 - Prob. 12.4DMPCh. 12 - Continuing Cases Target Case LO12-4, LO12-6...
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- LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-for-sale. The market price of Branch’s bonds fell by $450,000 due to concerns about one of the company’s principal drugs. The concerns were justified when the FDA banned the drug. $100,000 of that decline in value already had been included in OCI as a temporary unrealized loss in a prior period. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250,000 as noncredit losses. LED does not plan to sell the investment and does not think it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for the decline in market value in the current period? How should the decline affect net income and comprehensive income? General Journal What journal entries should LED record to account for the decline in market value in the current period?Note: If no…arrow_forwardPlease don't give solution image formatarrow_forwardBeresford Incorporated purchased several investments in debt securities during 2023, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent. Held-to-Maturity Securities: Fair Value 12/31/2023 Fair Value 12/31/2024 Amortized Cost 12/31/2023 Amortized Cost 12/31/2024 ABC Company Bonds $ 375,000 $ 400,000 $ 367,500 $ 360,000 Trading Securities: Fair Value 12/31/2023 Fair Value 12/31/2024 Cost DEF Company Bonds $ 48,000 $ 59,500 $ 66,000 GEH Incorporated Bonds $ 47,000 $ 77,000 $ 39,000 IJK Incorporated Bonds $ 44,000 $ 38,500 $ 32,900 Available-for-Sale Securities: Fair Value 12/31/2023 Fair Value 12/31/2024 Cost LMN Company Bonds $ 130,500 $ 150,400 $ 140,000 What total unrealized holding gain would Beresford report in its 2024 income statement relative to its investments in bonds?arrow_forward
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