ACC327_EX2CH17_StudyGuide - Chapter 17 Study Guide...

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Chapter 17 Study Guide – INVESTMENTS -What are the two types of investments? -_________________ are defined as instruments representing a creditor relationship (i.e. investments in government securities, corporate bonds, etc.). They are classified into 3 categories: 1._________________ : securities that the investor has the positive intent and ability to hold to maturity. 2._________________ : securities bought and help primarily for sale in the near future to generate income on a short-term price difference. 3._________________ : securities not classified as held-to-maturity or trading securities. They are held for longer than trading securities but not as long as held-to-maturity securities. -Accounting for held-to-maturity (HTM) securities: -They are accounted for at _______________ cost. -Discounts and premiums on long-term investments in bonds are amortized using the ________________________ method, unless the ___________________ method or some other method yields a similar result. -The securities may be classified as ________________ assets or _______________ assets depending on their ________________________. -Example for HTM Securities. On January 1, 2009, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000 for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2009, and mature January 1, 2014, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category . A.) Prepare the journal entry at the date of the bond purchase. B.) Prepare a bond amortization schedule. C.) Prepare the journal entry to record the interest received and the amortization for 2009.
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D.) Prepare the journal entry to record the interest received and the amortization for 2010. -Accounting for available-for-sale (AFS) securities: -They are reported at _________________. -____________________ gains/losses from changes in ________________ are recorded in an ____________________ account (i.e. these gains/losses do not affect ______________, but they do affect _____________________). -An ________________________ account is used to adjust the investment account to ____________________ (i.e. ______________ is not affected by changes in fair value). -Long term investments in bonds classified as AFS are reported at __________________ with premiums/discounts amortized using the ___________________ method. -Sales of individual AFS securities result in ________________ or ____________ as follows: _______________ : XXX _______________: XXX _______________: XXX -__________________ gains/losses affect net income. ________________ do not affect net income. -The ________________________ account and ____________________ account are not affected
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This note was uploaded on 04/10/2011 for the course ACC 327 taught by Professor Sign during the Spring '11 term at S. Alabama.

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ACC327_EX2CH17_StudyGuide - Chapter 17 Study Guide...

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