LooseLeaf Intermediate Accounting w/ Annual Report; Connect Access Card
8th Edition
ISBN: 9781259542848
Author: J. David Spiceland
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.28Q
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.
Unrealized holding gains and losses: These are gains and losses which are unrealized and are the result of changes in cost and fair values of the investment for the period the investment is held.
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.
To explain: The reporting of OTT impairment by Corporation H
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Do not give solution in image
4.
Baguio Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Baguio company has a P2,000,000 note payable to First Bank. The bank is considering two alternatives.
1. Acceptance of land owned by Baguio company valued at P1,600,000 and carried at its historical cost of P1,120,000.
2. Acceptance of an equity interest in Baguio company in the form of 16,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share.
Under the first alternative, what is the amount of gain/(loss) on extinguishment of debt?
Baguio Company is experiencing financial difficulty and is renegotiating debt restructuring with its creditor to relieve its financial distress. Baguio Company has a P5,000,000 note payable to First Bank. The bank is considering two alternatives:A. Acceptance of land owned by Baguio Company carried at historical cost of P2,800,000 and with a fair value of P3,000,000.B. Acceptance of an equity interest on Baguio Company in the form of 40,000 shares with a par value of P100 per share. The note payable has a current fair value of P5,500,000.
Due to adverse economic circumstances and poor management, Tagaytay Highlands Company has negotiated a restructuring of its 9% P6, 000,000 note payable to Second Bank due on January 1, 2021. There is no accrued interest on the note. The bank has reduced the principal obligation from P6, 000,000 to P5, 000,000 and extends the maturity to 3 years or on December 31, 2023. However, the new interest rate is 13% payable annually every December 31. The…
Chapter 12 Solutions
LooseLeaf Intermediate Accounting w/ Annual Report; Connect Access Card
Ch. 12 - Prob. 12.1QCh. 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 - Prob. 12.11QCh. 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 - Prob. 12.24QCh. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Explain how the CECL model (introduced in ASU No....Ch. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Available -for-sale securities LO12-4 SL...Ch. 12 - Prob. 12.4BECh. 12 - Prob. 12.5BECh. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Prob. 12.6ECh. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Prob. 12.10ECh. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Prob. 12.15ECh. 12 - Prob. 12.16ECh. 12 - Prob. 12.17ECh. 12 - Prob. 12.18ECh. 12 - Prob. 12.19ECh. 12 - Prob. 12.20ECh. 12 - Prob. 12.21ECh. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 1CPACh. 12 - Prob. 2CPACh. 12 - Prob. 3CPACh. 12 - Prob. 4CPACh. 12 - Prob. 5CPACh. 12 - Prob. 6CPACh. 12 - Prob. 7CPACh. 12 - Prob. 8CPACh. 12 - Prob. 9CPACh. 12 - Prob. 10CPACh. 12 - Prob. 11CPACh. 12 - Prob. 12CPACh. 12 - Prob. 13CPACh. 12 - Prob. 1CMACh. 12 - Prob. 2CMACh. 12 - Prob. 3CMACh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10PCh. 12 - Prob. 12.11PCh. 12 - Prob. 12.12PCh. 12 - Prob. 12.13PCh. 12 - P 12–14
Classifying investments
LO12–1 through...Ch. 12 - Prob. 12.15PCh. 12 - Prob. 12.16PCh. 12 - Prob. 12.17PCh. 12 - Prob. 12.18PCh. 12 - Prob. 12.1BYPCh. 12 - Prob. 12.2BYPCh. 12 - Case 12–4
Accounting for debt and equity...Ch. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.7BYP
Knowledge Booster
Similar questions
- According to the question feedback whether its right or wrong. Net income above was correct. Other comp income is 0 however and correct. Net effect on comprehensive income is not (681,000) as the feedback marked it as wrong.arrow_forwardWhich of the following statements is CORRECT? O a. The NYSE is an example of an over-the-counter market. O b. Only institutions, and not individuals, can engage in derivative market transactions. O c. If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction. O d. As they are generally defined, money market transactions involve debt securities with maturities of less than one year. e. If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.arrow_forwardAssume these are the only securities Martin owns and that the company accounts for them as trading securities. How will changes in the prices of the securities affect net income? What would the effect on net income be if the Nichols Inc. securities were worth $463,000 at year-end (instead of $558,000)arrow_forward
- Chico Company entered into a troubled debt restructuring agreement with Social Bank. The bank agreed to accept the land with a carrying amount of P800,000 and a fair value of P1,000,000 in exchange for a note payable with a carrying amount of P1,500,000. What is the gain on extinguishment of debt?arrow_forwardHillsborough Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It is determined that this loss in value is uncollectible. Prepare the journal entry, if any, to record the reduction in value.arrow_forwardFor the past three years, Sheridan Holdings Ltd. has held bonds as investments, which it accounted for using the amortized cost model. The bonds were purchased at a discount and are currently classified as Bond Investment at Amortized Cost. There have been no disposals of bonds since the purchase in early 2021. Due in part to Bonafacio's liquidity needs, and the recent market rate of interest increases, Sheridan has changed its plans concerning holding the bonds as fixed income. It now feels unwilling to wait for the bonds' maturity date to collect the proceeds from the maturity. Consequently, it was decided in December 2023 that the bonds should instead be accounted for as Fair Value-Net Income (FV-NI) Investments. Sheridan follows IFRS. The carrying amount and fair value of the investment portfolio of bonds appears below, along with the interest income recorded in the accounts: Year Ended December 31, 2023 2022 2021 Carrying amount at amortized cost $229,247 $225,725 $222,401 Fair…arrow_forward
- On January 1, 2001, X.Co purchased marketable equity securities at its market value of P5,000,000, while the company also paid commission, taxes and other transaction costs amounting to P200,000. The securities had the following market value on the these dates: December 31, 2001 4,700,000 December 31, 2002 5,300,000 No securities were sold during 2001 and 2002. What amount of unrealized gain or loss should be reported in the 2002 income statement if the securities were held for trading?arrow_forwardPlease help me with correct answer thankuarrow_forwardThe following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2024. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity. but to have them available for sale in years when circumstances warrant. Omamental's fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2023. March 31 Acquired 6X Distribution Transformers Corporation bonds costing $540,000 at face value. September 1 Acquired $1,110,000 of American Instruments bonds at face value. September 30 Received semiannual interest payment on the Distribution Transformers bonds. October 2 Sold the Distribution Transformers bonds for $579,000. November 1 Purchased $1,560,000 of M&D Corporation 4% bonds at face value. December 31 Recorded any necessary adjusting entry(s) relating to the Investments. The market prices of the investments are: American Instruments…arrow_forward
- A held-to-maturity debt investment with a carrying value of $5,000,000 is determined to be impaired due to concerns about the investee's ability to pay principal and interest. The investment's current market value is $4,000,000. The bonds were originally sold at par. Which statement is true? Select one: O a. A $1,000,000 loss is reported in OCI. O b. The investment account is directly reduced by $1,000,000. c. No loss is reported. d. A $1,000,000 loss is reported in income.arrow_forwardMetlock, Inc. has an investment in trading securities of $155000. This investment experienced an unrealized loss of $8500 during the current year. Assuming a 34% tax rate, the amount of this loss that would reported as part of other comprehensive income would be: None. $52700 loss. $102300 loss. $155000 loss.arrow_forwardMinden Co. has unsecured debt of $1,500,000 that carries interest at 10%. If Minden Co. was able to offer land and buildings with an appraised value of $2 million as security for the debt, the interest rate should * a) decrease because of reduced risk b) decrease because of higher profits c) decrease because of a higher interest cover ratio d) increase because of risk e) none of the above Capacity : a) cannot be changed in the short run b) can be changed in the long run c) is completely under the control of management d) (a) & (b), but not (c) e) (a), (b) & (c)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT