1.
Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.
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.
To Locate: The annual report of a public company that includes the footnote describing the securities available for sale, using the EDGAR in the SEC website.
2.
To Identify: The caption under which the securities are reported in the comparative balance sheets and to whether they are classified as current or non-current assets.
3.
To Explain: The method of reporting the realized gains and losses, in the comparative income statement.
4.
To Explain: The method of reporting the unrealized gains and losses, in the comparative statements and the shareholder’s equity.
5.
To Explain: Under what head accumulated unrealized gains or losses identifiable in the comparative balance sheets. And the reason for not reporting them in the Income Statement.
6.
To Explain: The information provided by the changes in the cash flow of these investments in the statement of cash flow.
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Chapter 12 Solutions
Intermediate Accounting, 10 Ed
- Required information Problem 15-2A Recording, adjusting, and reporting available-for-sale debt securities LO P3 Skip to question [The following information applies to the questions displayed below.] Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 Jan. 20 Purchased Johnson & Johnson bonds for $25,000. Feb. 9 Purchased notes of Sony for $59,490. June 12 Purchased bonds of Mattel for $45,000. Dec. 31 Fair values for debt in the portfolio are Johnson & Johnson, $26,900; Sony, $49,050; and Mattel, $55,950. Year 2 Apr. 15 Sold all of the bonds of Johnson & Johnson for $28,000. July 5 Sold all of the bonds of Mattel for $39,000. July 22 Purchased notes of Sara Lee for $17,100. Aug. 19 Purchased bonds of Kodak for $18,450. Dec. 31 Fair values for debt in the portfolio are Kodak, $18,900; Sara Lee,…arrow_forwardQuestion 24 What Securities Act requires a listed company to file an annual report on Form 10K? The Securities Act of 1933 The Internal Revenue Code The Securities Act of 1934 The Securities Act of 1954arrow_forwardMC Qu. 41-14 The The requires that all investment companies file a notification of registration with the SEC. Multiple Choice Market Reform Act Penny-Stock Act requires that all investment... Investment Company Act Securities and Exchange Amendment Act APR 27 Travearrow_forward
- Problem 15-7 (ACP Chaplain Company was very active in acquiring and selling investments in equity securities. Data regarding the securities are: Cost Market value December 31, 2020 Trading securities Securities not held for trading 5,000,000 3.000.000 8,000,000 4,600,000 (40m 3,100,000 00,N 00,000 (30 December 31, 2021 5,500,000 50 3,300,000 30 8800000 The entity made an irrevocable election to present changes in fair value of the securities not held for trading in other 5,000,000 3,000,000 ,000,000 Trading securities Securities not held for trading comprehensive income. Required: Prepare journal entries to recognize the changes in market value for 2020 and 2021.arrow_forwardQuestion 3: IFRS 9 The investment portfolio of the ABS entity includes investments in the following financial instruments: On 01.01.20X4, the entity received a bond with a fair value of AZN 1,000. In addition to the purchase price, 70 AZN broker fee and 30 AZN documentation costs were incurred. The entity regularly monitors market prices to sell this bond at a reasonable price in the market. Interest income of AZN 50 was calculated and paid during the period. On 31.12.20x4, the bond has a fair value of AZN 1,200, but has not yet been sold. 1. II. On 01.01.20X4, the entity bought a bond with a nominal value of AZN 1,000 for AZN 900. The effective interest rate is 10% and the coupon rate is 7%. The market price of this bond as of 31.12.2004 was AZN 1,100. The entity accounts for these bonds using the fair value method recognized in other comprehensive income. III. On 01.01.20X4, the entity acquired 10,000 shares with a nominal value of 1 AZN for the purpose of sale by paying 1.2 AZN per…arrow_forwardRequired information Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3 [The following information applies to the questions displayed below.] Mead Incorporated began operations in Year 1. Following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 January 20 Purchased Johnson & Johnson bonds for $24,000. February 9 Purchased Sony notes for $58,590. June 12 Purchased Mattel bonds for $44,000. December 31 Fair values for debt in the portfolio are Johnson & Johnson, $25,700; Sony, $48,450; and Mattel, $56,050. Year 2 April 15 Sold all of the Johnson & Johnson bonds for $27,000. July 5 Sold all of the Mattel bonds for $38,300. July 22 Purchased Sara Lee notes for $16,300. August 19 Purchased Kodak bonds for $17,750. December 31 Fair values for debt in the portfolio are Kodak, $18,550; Sara Lee, $15,500; and Sony, $63,000. Year 3 February 27 Purchased Microsoft bonds for…arrow_forward
- Exercise 15-1 (Static) Debt and equity securities and short- and long-term investments LO C1 Complete the following descriptions by selecting the appropriate option. 1. Debt securities reflect a(n) 2. Equity securities reflect a(n) 3. Short-term investments are securities that (1) management intends to convert to cash within or the 4. Long-term investments in securities are defined as those securities that are convertible to cash or are relation such as with investments in notes and bonds. relation such as with investments in shares of stock. whichever is longer, and (2) are readily convertible to to be converted into cash in the short term.arrow_forwardProblem 15-2A Recording, adjusting, and reporting available-for-sale debt securities LO P3 Skip to question [The following information applies to the questions displayed below.] Mead Inc. began operations in Year 1, following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 Jan. 20 Purchased Johnson & Johnson bonds for $25,000. Feb. 9 Purchased notes of Sony for $59,490. June 12 Purchased bonds of Mattel for $45,000. Dec. 31 Fair values for debt in the portfolio are Johnson & Johnson, $26,900; Sony, $49,050; and Mattel, $55,950. Year 2 Apr. 15 Sold all of the bonds of Johnson & Johnson for $28,000. July 5 Sold all of the bonds of Mattel for $39,000. July 22 Purchased notes of Sara Lee for $17,100. Aug. 19 Purchased bonds of Kodak for $18,450. Dec. 31 Fair values for debt in the portfolio are Kodak, $18,900; Sara Lee, $16,500; and Sony,…arrow_forwardExercise 12-3 (Algo) Securities held-to-maturity [LO12-1] FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T's investment activities during the last two months of 2021. At November 1, FF&T held $3O million of 25-year, 8% bonds of Convenience, Inc., purchased May 1, 2021, at face value. Management has the positive intent and ability to hold the bonds until maturity. FF&T's fiscal year ends on December 31. 1 Received semiannual interest of $1.2 million from the Convenience, Inc., bonds. 1 Purchased 10% bonds of Facsimile Enterprises at their $24 million face value, to be held until they mature in 2024. Semiannual interest is payable May 31 and November 30. 31 Purchased U.S. Treasury bills to be held until they mature in two months for $9.5 million. 31 Recorded any necessary adjusting entry(s) relating to the investments. Nov. Dec. The fair values of the…arrow_forward
- ! Required information Problem 15-2A (Algo) Recording, adjusting, and reporting available-for-sale debt securities LO P3 [The following information applies to the questions displayed below.] Mead Incorporated began operations in Year 1. Following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 January 20 Purchased Johnson & Johnson bonds for $24,500. February 9 Purchased Sony notes for $59,040. June 12 Purchased Mattel bonds for $44,500. December 31 Fair values for debt in the portfolio are Johnson & Johnson, $26,300; Sony, $49,750; and Mattel, $54,550. Year 2 April 15 Sold all of the Johnson & Johnson bonds for $27,500. July 5 Sold all of the Mattel bonds for $38,650. July 22 Purchased Sara Lee notes for $16,700. August 19 Purchased Kodak bonds for $18, 100. December 31 Fair values for debt in the portfolio are Kodak, $18,725; Sara Lee, $16,000; and Sony, $62,000. Year 3 February 27 Purchased Microsoft bonds for…arrow_forwardProblem 1 about Trading Securities Bank National investment manager invests some of its financial resources in securities trading. During the last quarter of 2018, the following transactions took place in connection with trading securities. Nov. 5. Buy 200 shares of M Company's ordinary shares for $ 86 per share.Nov 19. Buy 300 shares of Company P preferred stock at $ 63 per share.Dec 29 Sold 100 shares of Company M's ordinary shares for $ 89 per share.Dec. 15. Buy 400 shares of T Company common stock for $ 37 per shareDec 17 Company P shares are sold at preference shares at $ 62 per share As of December 31, 2010, the stock market value was as follows:M, $ 87 per share;P, $ 61 per share; andT, $ 37.25 per share.The bank did not have any trading effects at the beginning of the last quarter of 2010. Requested:1. Prepare a journal entry to record the information.2. Show what the bank reported in the 2010 fourth quarter profit and loss statement for these trading securities.3. Show how the…arrow_forwardExercise 14-14 (Algo) New debt issues; offerings announcements [LO14-2] When companies offer new debt security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the debt offerings reported in December 2024: New Securities Issues Corporate National Equipment Transfer Corporation—$212 million bonds via lead managers Second Tennessee Bank N.A. and Morgan, Dunavant & Company, according to a syndicate official. Terms: maturity, December 15, 2033; coupon 7.58%; issue price, par; yield, 7.58%; noncallable; debt ratings: Ba-1 (Moody's Investors Service, Incorporated), BBB+ (Standard & Poor's). IgWig Incorporated—$362 million of notes via lead manager Stanley Brothers, Incorporated, according to a syndicate official. Terms: maturity, December 1, 2035; coupon, 6.58%; Issue price, 99; yield, 6.68%; call date, NC; debt ratings: Baa-1 (Moody's Investors Service, Incorporated), A (Standard & Poor's).…arrow_forward
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
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