ch17tcShort - Chapter 17-1 C H A P T E R C H A P T E R 17...

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Unformatted text preview: Chapter 17-1 C H A P T E R C H A P T E R 17 17 INVESTMENTS INVESTMENTS Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Chapter 17-2 1. I dentify the three categories of debt securities and describe the accounting and reporting treatment for each category. 2. Understand the procedures for discount and premium amortization on bond investments. 3. I dentify the categories of equity securities and describe the accounting and reporting treatment for each category. 4. Explain the equity method of accounting and compare it to the fair value method for equity securities. 5. Describe the accounting for the fair value option. 6. Discuss the accounting for impairments of debt and equity investments. 7. Explain why companies report reclassification adjustments. 8. Describe the accounting for transfer of investment securities between categories. Lear ning Objectives Lear ning Objectives Chapter 17-3 Differ ent motivations for investing: To earn a high rate of return. To secure certain operating or financing arrangements with another company. I nvestment Accounting Approaches Chapter 17-4 Companies account for investments based on the type of security (debt or equity) and their intent with respect to the investment. I nvestment Accounting Approaches I llustr ation 17-1 Chapter 17-5 LO 1 I dentify the thr ee categor ies of debt secur ities and descr ibe the accounting and r epor ting tr eatment for each categor y. Debt securities (creditor relationship): I nvestments in Debt Securities U.S. government securities Municipal securities Corporate bonds Convertible debt Commercial paper Type Held-to-maturity Trading Available-for-sale Accounting Category Chapter 17-6 LO 1 I dentify the thr ee categor ies of debt secur ities and descr ibe the accounting and r epor ting tr eatment for each categor y. I nvestments in Debt Securities Accounting for Debt Securities by Category I llustr ation 17-2 Chapter 17-7 Held-to-Maturity Securities Classify a debt security as held-to-matur ity only if it has both (1) the positive intent and (2) the ability to hold securities to maturity. Accounted for at amor tized cost , not fair value. Amortize premium or discount using the effective- inter est method unless the straight-line method yields a similar result. LO 2 Under stand the pr ocedur es for discount and pr emium amor tization on bond investments. Chapter 17-8 LO 2 Under stand the pr ocedur es for discount and pr emium amor tization on bond investments. I llustr ation: KC Company purchased $100,000 of 8 percent bonds of Evermaster Corporation on January 1, 2009, at a discount, paying $92,278. The bonds mature January 1, 2014 and yield 10%; interest is payable each July 1 and January 1. KC records the investment as follows: Januar y 1, 2009 Held-to-Maturity Securities 92,278 Cash 92,278 Held-to-Maturity Securities Chapter 17-9 LO 2 I llustr ation 17-3 Schedule of I nterest Revenue and Bond Discount Amortization Effective-I nterest Method Held-to-Maturity Securities Chapter...
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This note was uploaded on 04/14/2010 for the course TOBIN 630 taught by Professor Alan during the Fall '10 term at Adams State University.

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ch17tcShort - Chapter 17-1 C H A P T E R C H A P T E R 17...

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