INTERMEDIATE ACCOUNTING
8th Edition
ISBN: 9780078025839
Author: J. David Spiceland
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
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
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Western Die-Casting Company holds an investment in unsecured bonds of LGB Heating Equipment, Inc. When the investment was acquired, management’s intention was to hold the bonds for resale. Now management has the positive intent and ability to hold the bonds to maturity. How should the reclassification of the investment be accounted for?
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?
Franklin Corp. has a debt investment that it has held forseveral years. When it purchased the debt investment,Franklin classified and accounted for it as available-forsale.Can Franklin use the fair value option for thisinvestment? Explain.
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING
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
- 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.arrow_forwardOn August 31, 2002, Rubics Company purchased the following equity securities and irrevocably elected to measure them at fair value through other comprehensive income: Fair Value Security Cost December 31, 2002 ₱ 96,000 ₱ 84,000 152,000 158,000 162,000 146,000 On December 31, 2002, Rubics reclassified its investment in security F from fair value through other comprehensive income to held for trading securities. What total amount of loss on reclassification should be included in Rubics' income statement for the year ended December 31, 2002? 0 b. 16,000 c. 22,000 d. 28,000arrow_forwardVictoria Company has investments in marketable securities classified as trading and available-for-sale. At the beginning of the year, the aggregate market value of each portfolio exceeded its amortized cost. During the year, Victoria sold some securities from each portfolio. At the end of the year, the aggregate amortized cost of each portfolio exceeded its market value. Victoria also has investments in bonds classified as held-to-maturity, all of which were purchased for face value. During the year, some of these bonds held by Victoria were called prior to their maturity by the bond issuer. Three months before the end of the year, additional similar bonds were purchased for face value plus 2 months accrued interest. Required: 1. Explain how Victoria accounts for: a. sale of securities from each portfolio b. each equity securities portfolio at year-end 2. Explain how Victoria accounts for the disposition prior to their maturity of the long-term bonds called by their issuer. 3. Explain how Victoria reports the purchase of the additional similar bonds at the date of the acquisition.arrow_forward
- An entity had investments in marketable debt securities costing 650,000 that were classified as available-for-sale. On June 30, year 2, it decided to hold the investments to maturity and accordingly reclassified them to the held-to-maturity category on that date. The investments’ fair value was 575,000 at December 31, year 1, 530,000 at June 30, year 2, and 490,000 at December 31, year 2. The entity does not elect the fair value option to account for these investments. What amount of loss from investments should the entity report in its year 1 income statement? What amount should the entity report as net unrealized loss on marketable debt securities in its year 2 statement of stockholders’ equity?arrow_forwardAn entity, with an investment in debt securities carried as FVOCI, deemed its original business model as not applicable starting November 30, 2020, and decided to reclassify its investment as FVPL. Which of the following statements is true? A. The reclassification shall be made on November 30, 2020; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to profit or loss B. The reclassification shall be made on January 1, 2021; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to profit or loss C. The reclassification shall be made on January 1, 2021; the investment is transferred at fair value from FVOCI to FVPL; the cumulative gain or loss previously recognized in OCI is transferred to retained earnings D. The reclassification shall be made on November 30, 2020; the…arrow_forwardThe Carrefour Group reported the following description of its available-for-sale investments. Assets available for sale are . . . valued at fair value. Unrealized . . . gains or losses are recorded as shareholders’ equity until they are sold. In a recent year, Carrefour’s financial statements reported €18 million in net unrealized losses (net of unrealized gains), which are included in the fair value of its available-for-sale securities reported on the balance sheet. 1. What amount of the €18 million net unrealized losses, if any, is reported in the income statement? Explain. 2. If the €18 million net unrealized losses are not reported in the income statement, in which statement are they reported, if any? Explain.arrow_forward
- S&L Financial buys and sells securities which it classifies as available-for-sale. Assume that on December 27, 2024, S&L purchased Coca-Cola bonds at par for $745,000 and sold the bonds on January 3, 2025, for $748,500. At December 31, the bonds had a fair value of $742,500, and S&L has the intent and ability to hold the investment until fair value recovers. What pretax amounts did S&L include in its 2024 and 2025 net income as a result of thisarrow_forwardHobbes Corporation’s purchase of stock of Tiger Company gave Hobbes voting control over Tiger. A portion of the amount Hobbes paid reflects the fact that Tiger's inventories have a market value in excess of their book value.How should this portion of the cost be accounted for by Hobbes Corporation? Select one: a. Included in the carrying value of the investment until disposition of the stock b. Amortized against investment revenue over the remaining useful life of the investment c. Reported as goodwill on the balance sheet of Hobbes Corporation d. Added to the inventory cost on Hobbes's consolidated balance sheetarrow_forwardYour client, Lewison International, has informed you that it has reached an agreement with Herro Company to acquire all of Herro’s assets. This transaction will be accomplished through the issue of Lewison’s common stock. After your examination of the financial statements and the acquisition agreement, you have discovered the following important facts. The Lewison common stock issued has a fair value of $800,000. The fair value of Herro’s assets, net of all liabilities, is $700,000. All asset book values equal their fair values except for one machine valued at $200,000. This machine was originally purchased two years ago by Herro for $180,000. This machine has been depreciated using the straight-line method with an assumed useful life of 10 years and no salvage value. The acquisition is to be considered a taxfree exchange for tax purposes. Assuming a 30% tax rate, what amounts will be recorded for the machine, deferred tax liability, and goodwill?arrow_forward
- Beresford 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_forwardTanner-UNF Corporation acquired as a long-term investment $200 million of 6% bonds, dated July 1, on July 1, 2021. Companymanagement has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNFdecided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar riskand maturity. Tanner-UNF paid $170 million for the bonds. The company will receive interestsemiannually on June 30 and December31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $180 million. Required:1. How would this investment be classified on Tanner-UNF's balance sheet?2. to 4. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021, interest on December 31, 2021, atthe effective (market) and fair value changes as of December 31, 2021.5. At what amount will Tanner-UNF report its investment in the December 31, 2021, balance…arrow_forwardBeresford Inc. purchased several investments in debt securities during 2020, 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 12/31/2020 Fair Value 12/31/2021 Amortized Cost 12/31/2020 Amortized Cost 12/31/2021 ABC Co. Bonds $ 375,000 $ 400,000 $ 367,500 $ 360,000 Trading Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Cost DEF Co. Bonds $ 48,000 $ 59,500 $ 66,000 GEH Inc. Bonds $ 47,000 $ 77,000 $ 39,000 IJK Inc. Bonds $ 44,000 $ 38,500 $ 32,900 Available-for-Sale Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Cost LMN Co. Bonds $ 130,500 $ 150,400 $ 140,000 What would be the balance in Beresford's accumulated other comprehensive income with respect to these investments in its 12/31/2021 balance sheet (ignore taxes)?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning