Midterm 2 - Chapter 17 Amortized Cost acquisition cost...

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Chapter 17 Amortized Cost – acquisition cost adjusted for the amortization of discount or premium, if appropriate Available for Sale Securities – debt securities not classified as held-to-maturity or trading securities Consolidated Financial Statements – when the parent treats the subsidiary as an investment, this is what the parent prepares ; treat the parent and the subsidiary as a single economic entity Controlling Interest – when one corporation acquires a voting interest of more than 50 percent in another corporation Debt Securities – creditor relationship with another entity that can be classified into held-to-maturity, trading, or available-for-sale Effective Interest Method – method where you first compute interest expense by multiplying the carrying value at the beginning of the period by the effective rate then the company determines the bond discount or premium amortization by comparing the interest expense with the interest to be paid Equity Method – investor and the investee acknowledge a substantive economic relationship ; investor’s proportionate share of the earnings (losses) of the investee periodically increases (decreases) the investment’s carrying amount and all dividends received by the investor from the investee also decrease the investment’s carrying amount Equity Securities – ownership interests such as common, preferred, or other capital stock ; also include rights to acquire or dispose of ownership interests at an agreed upon or determinable price, such as in warrants, rights, and call or put options Exchange for Noncash Consideration – property or services that should be recorded at (1) the fair value of the consideration given, or (2) fair value of the security received, whichever is more clearly determinable Fair Value – amount at which a company can exchange a financial instrument in a current transaction between willing parties, other than in a forced or liquidation sale Fair Value Method – requires that companies classify equity securities at acquisition as available-for-sale or trading securities Gains Trading – when companies sell their ‘winners’ reporting the gains in income and hold on to the losers Held to Maturity Securities – debt securities that the company has the positive intent and ability to hold to maturity Holding Gain or Loss – net change in the fair value of a security from one period to another, exclusive of dividend or interest revenue recognized but not received Impairment – a loss in value that is other than temporary Investee – corporation whose common stock is of interest to another corporation Investor – corporation acquiring an interest in the common stock of another corporation Parent – investor corporation that has a voting interest of more than 50 percent Reclassification Adjustment – used to ensure that gains and losses are not counted twice when a sale occurs Securities Fair Value Adjustment Account
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Midterm 2 - Chapter 17 Amortized Cost acquisition cost...

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