1.
Investments: Companies invest in stocks and bonds of other companies or governmental entity to deploy their excess fund, and/or for a specific business strategy.
Held-to-maturity security: The debt securities which are held by the investor with intent to hold the investment till its maturity are referred to as held-to-maturity securities.
Trading securities: These are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.
Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So, fair value is the selling price to the seller and the purchase price for the buyer.
Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
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: How to classify this investment on Company FI’s balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other.
2.
To Journalize: The purchase of common shares of Company NS, by Company FI.
3.
To Indicate: The effect of this investment on 2018 income of Company FI.
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INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
- 1arrow_forwardAnswer should be presented as: DECREASE 123456 or INCREASE 123456 During 2021, the first year of operations, Dejavu Company purchased the following equity securities: Market Value December 31, 2022 1,900,000 1,100,000 1,600,000 1,200,000 Security One Security Two Security Three Security Faur Cost 2,200,000 700,000 December 31, 2021 1,400,000 1,000,000 1,500,000 2,500,000 1,600,000 2,000,000 Security One and Security Two are held for trading and Security Three and Security Four are measured at Fair value through other comprehensive income by election. During 2022, the entity sold Security Two for P1,000,000 and half of Security Four for P500,000. Revenues and operating (marketing and administrative) expenses for the year 2022 are P7,500,000 and P4,000,000 respectively. How much is the change in Retained Earnings for the year 2022 due to the equity securities (indicate whether increase or decrease)?arrow_forwardHello please help me to answer this Please provide clear solutions. Thank you!arrow_forward
- Required Information Exercise 12-17 (Algo) Equity investments; fair value through net income [LO12-5] [The following information applies to the questions displayed below.] The accounting records of Jamaican Importers, Incorporated, at January 1, 2024, included the following: Assets: Investment in IBM common shares Less: Fair value adjustment $ 1,995,000 (210,000) No changes occurred during 2024 in the Investment portfolio. $ 1,785,000 Exercise 12-17 (Algo) Part 1 Required: 1. Prepare appropriate adjusting entry(s) at December 31, 2024, assuming the fair value of the IBM common shares was $1,359,000. Note: If no entry is required for a transaction/event, select "No journal entry required" In the first account field. View transaction list Journal entry worksheet 1 Record the fair value adjustment assuming the fair value of the IBM common shares was $1,359,000. Note: Enter debits before credits. Transaction General Journal Debit Creditarrow_forwardGg.13.arrow_forwardPls. answer this onearrow_forward
- #9 YOO-YOO Corporation has the following investment which was held throughout 2021–2022: Fair Value Cost 12/31/21 12/31/22 Equity investment $836000 $1128000 $1060000 What amount of gain or loss would YOO-YOO Corporation report in its income statement for the year ended December 31, 2022, related to its investment, if the fair value method of accounting was used? $292000 gain. $68000 loss. $68000 gain. $224000 gain.arrow_forward39. D On January 1, 2019, Caraga Company purchased equity securities to be held as financial assets measured at fair value through other comprehensive income. Market – 12/31/19 3,200,000 3,500,000 4,600,000 Market 12/31/2020 Security R Security S Security T Cost 3,000,000 4,000,000 5,000,000 3,700,000 4,700,000 On January 31, 2020, the entity sold Security R for P3,500,000. What amount should be recognized directly in retained earnings of as a result of the sale of investment in 2020? a. 500,000 b. 300,000 c. 200,000 d. 0arrow_forwardProblem 7: In January 2020, Golden Company invested in P900,000 equity securities representing 15% interest in Rings Company. Golden Company incurred transaction cost of P100,000. On December 31, 2020, this investment has a market value of P950,000. On July 1, 2021, Golden Company sold all the investments for P1,200,000. 7.1 What amount of gain on sale should Golden Company recognize in profit or loss assuming the security was classified as Investment at FVPL? 7.2 How much is the amount transferred to Retained earnings upon sale assuming the security was classified as Investment at FVOCI? 7.3 Prepare all the necessary journal entries.arrow_forward
- Why it uses Market Price as Carrying Amount?arrow_forward2arrow_forwardProblem 15-14 (AICPA Adapted) On January 1, 2020, Jerome Company purchased nontrading equity investments which are irrevocably designated at FVOČI: Market value December 31, 2020 Transaction Purchase price cost Security A Security B Security C 1,000,000 2,000,000 4,000,000 100,000 200,000 400,000 1,500,000 2,400,000 4,700,000 On July 1, 2021, the entity sold Security C for P5,200,000. What amount of gain on sale should be recognized in the income statement for 2021? 800,000 b. 500,000 300,000 d. а. C.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning