INTERMEDIATE ACCOUNTING
10th Edition
ISBN: 9781264046249
Author: SPICELAND
Publisher: MCG
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Chapter 12, Problem 12.8Q
To determine
Held-to-maturity security: The debt securities which are held by the investor with an 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.
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 indicate: The reclassified category of debt investment in Company L, in the books of Company WD
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Students have asked these similar questions
Western Die-Casting Company holds an investment in unsecured bonds of LGB Heating Equipment, Inc. Whenthe investment was acquired, management’s intention was to hold the bonds for resale. Now management has thepositive intent and ability to hold the bonds to maturity. How should Western account for the reclassification ofthe investment?
Croger Manufacturing Inc. makes an investment in securities that they intend to hold for a period of time that is unspecified. How will this investment be reported?
Multiple Choice
Fair value.
Present value.
Historical cost.
Lower of cost or market.
4. Boss Co. purchased bonds at a discount in the open market as
an investment. The bonds will be held in order to collect their
contractual cash flows. Boss should account for these bonds at
a. Cost.
c. Fair value through OCI.
d. Lower of cost or market.
b. Amortized cost.
5. According to PFRS 9, on initial recognition, the entity has the
option of designating financial assets to be measured at FVPL
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING
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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Similar questions
- 1. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much unrealized gain (loss) is to be reflected in the statement of changes in equity and statement of comprehensive income at yearend 2020? 2. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: What is the carrying value of the investment on December 31, 2020? 3. Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: Determine the gain or (loss) to be recorded upon the sale of the investment.arrow_forwardWhich of the following is true regarding accounting for debt investments? A) The classification of the debt investments would affect how we record the purchase of the investments. B) The classification of the debt investments would affect how we record the interest revenue from the investments. C) The classification of the debt investments would affect how we record the sale of the investments. D) All of the above. Which of the following is NOT true when fair value option is elected for held - to - maturity debt investments? A) The fair value option must be elected at the time of purchase. B) The fair value option must be elected for all such investments. C ) Unrealized holding gains and losses on that investment will be recognized in net income. D) The investment is reported at fair value on the balance sheet.arrow_forwardWhen an investment in an available-for-sale debt security is transferred to trading because the company anticipates selling the security in the near future, the carrying value assigned to the investment when transferring it to the trading portfolio should be O the higher of its original cost or its fair value at the date of the transfer. O the lower of its original cost or its fair value at the date of the transfer. O its fair value at the date of the transfer. O its original cost.arrow_forward
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- General Motors invests in securities of other companies. Access GM’s 2019 10-K (which includes financial statements) using EDGAR at www.sec.gov. Required: What is the amount of any available-for-sale investment securities reported in the balance sheet? Is there an amount you can’t find in the balance sheet but that you know must be there? How are unrealized gains or losses on available-for-sale investments reported: in net income or OCI? In what note does GM indicate that policy? Are any investments reported by the equity method? In what note does GM provide an in-depth discussion of them? What amounts from equity method investments are reported in the 2019 income statement?arrow_forwardIFRS requires companies to measure their financial assets at fair value except when based on:(a) whether the equity method of accounting is used.(b) whether the fi nancial asset is a debt investment.(c) whether the fi nancial asset is an equity investment.(d) whether an investment is classifi ed as trading.arrow_forwardttarrow_forward
- Bailey Enterprises purchased bonds on the open market at a discount. The company intends to hold the bonds until maturity and ha sthe ability to do so. Bailey should account for the bonds at A. Cost B. Lower of cost or market C. Fair Value D. Amortizied costarrow_forwardThe fair value option allows a company to report most financial instruments at fair value at each reporting date. record the unrealized gains and losses related to changes in the fair value of available-for-sale debt securities in net income. account for held-to-maturity securities at amortized cost. all of these choices are true of the fair value option.arrow_forwardFor an investment to be classified as a current asset,a. the investment must be easily convertible to cash.b. the investor must intend to convert the investment to cash within one year or currentoperating cycle, whichever is longer, or use it to pay a current liability.c. both a and b must be met for the investment to be classified as a current asset.d. neither a nor b are relevant to the classification of an investment as a current asset.arrow_forward
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