Financial Accounting: Tools for Business Decision Making, 8th Edition
8th Edition
ISBN: 9781118953808
Author: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
Publisher: WILEY
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Chapter AH, Problem 3Q
(a)
To determine
Sale of debt investment:Debt investments refer to the investments made in debts by the investor for which it lends funds to the borrowing company at a predetermined interest and the debt amount is repaid on the maturity date. For example, corporate bonds, government bonds, certificate of deposits.
Gain on sale of debt investments: If the sale proceeds from sale of debt investments exceed the cost price of the debt investments, there is a gain on sale of investments.
Loss on sale of debt investments: If the sale proceeds from sale of debt investments is less than the cost price of the debt investments, there is a loss on sale of investments.
To explain: the computation of gain or loss on sale of debt investments.
(b)
To determine
To explain: the presentation of gain or (loss) on sale of debts investments in the financial statements.
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Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report available-for-sale debt investments. The IFRS company reports unrealized losses on these investments under the heading “Reserves” in its equity section. However, Mary can find no similar heading in the GAAP-based company financial statements. Can Mary conclude that the GAAP-based company has no unrealized gains or losses on its available-for-sale debt investments? Explain.
Which statement is not true?
Equity investment and trading debt investment have the same accounting about how to report their unrealized gain/loss and how to report them on the balance sheet.
Only debt securities, not equity securities, can be classified as held-to-maturity, available-for-sale or trading.
Change in fair value of available-for-sale and held-to-maturity debt investments have no impact on net income.
Cash flows relating to held-to-maturity investments and trading investments involve both investing and operating activities.
One of the primary reasons for investing in debt securities includes a. Deducting interest payments for tax purposes.b. Receiving dividend payments.c. Earning interest revenue.d. Acquiring ownership control in other companies.
Chapter AH Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
Ch. AH - Prob. 1QCh. AH - Prob. 2QCh. AH - Prob. 3QCh. AH - Prob. 4QCh. AH - What is the cost of an investment in stock?Ch. AH - Prob. 6QCh. AH - Prob. 7QCh. AH - Prob. 8QCh. AH - Prob. 9QCh. AH - Distinguish between the cost and equity methods of...
Ch. AH - What are consolidated financial statements?Ch. AH - What are the valuation guidelines for trading and...Ch. AH - Prob. 13QCh. AH - Prob. 14QCh. AH - Prob. 15QCh. AH - Prob. 16QCh. AH - Prob. 17QCh. AH - Prob. 18QCh. AH - Prob. H.1BECh. AH - Prob. H.2BECh. AH - Prob. H.3BECh. AH - Prob. H.4BECh. AH - Prob. H.5BECh. AH - Prob. H.6BECh. AH - Prob. H.7BECh. AH - Prob. H.8BECh. AH - Prob. H.1ECh. AH - Prob. H.2ECh. AH - Prob. H.3ECh. AH - Prob. H.4ECh. AH - Prob. H.5ECh. AH - Prob. H.6ECh. AH - Prob. H.7ECh. AH - Prob. H.8ECh. AH - Prob. H.1PCh. AH - Prob. H.2PCh. AH - Prob. H.3PCh. AH - Prob. H.4PCh. AH - Prob. H.5PCh. AH - Prob. H.6P
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