Acct Chap 6 - Chapter 6 Investments and Receivables 1...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 6 Investments and Receivables
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 INVESTMENTS Can be short-term (current asset) or long- term Categories include: » Financial instruments (e.g. certificates of deposit) » Equity securities (stocks of other companies) » Debt securities (bonds of other companies)
Background image of page 2
3 PepsiCo Inc. Consolidated Balance Sheet (partial) ASSETS (in millions) Current Assets : Cash and cash equivalents Short-term investments Accounts and notes receivable Inventories Prepaid expenses & other assets Total Current Assets Less Liquid Highly Liquid A FEDERAL RESERVE NOTE THE UNITED STATES OF AMERICA L7074 629F L7074 629F ONE DOLLAR ONE DOLLAR
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Investment in CD Assets = Liab. + O/E + Rev. Exp. Short-term Inv. – CD 100,000 Cash (100,000) On 10/2/04 , invest $100,000 in a 120-day CD. Principal plus interest @ 6% due upon investment maturity. Example: 4
Background image of page 4
Year-end (12/31/04) adjusting entry : Assets = Liab. + O/E + Rev. Exp. Interest Rec. 1,500 Interest Inc. 1,500 Investment in CD Interest = Principal x Rate x Time $1,500 = $100,000 x 6% x 90/360 5 October – 29 days November – 30 days December – 31 days 90 days
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Upon investment maturity (1/30/05): Assets = Liab. + O/E + Rev. Exp. Cash 102,000 Interest Inc. 500 Short-Term Inv. – CD (100,000) Interest Rec. (1,500) Investment in CD 6 Interest earned in January: $100,000 x 6% x 30/360 = $500
Background image of page 6
7 Reasons Companies Invest in Other Companies Earn return on short-term cash excesses Long-term investing for future cash needs Exert influence over investee Obtain control of investee
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
8 Accounting for Common-Stock Investments No significant influence 0% 20% Fair Value Method Significant influence 50% Equity Method Control 100% Consolidated F/S Our Focus
Background image of page 8
9 Investments Without Significant Influence Held-to-Maturity Securities (bonds only) Trading Securities Available-for-Sale Securities Use fair value method to account for Trading & AFS Securities
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/27/2010 for the course FIN 311 taught by Professor Haan during the Spring '10 term at St. Josephs NY.

Page1 / 36

Acct Chap 6 - Chapter 6 Investments and Receivables 1...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online