Notes Ch 12

Notes Ch 12 - Jorge Rossello Busi 100 Chapter 12 Notes I....

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Jorge Rossello Busi 100 Chapter 12 Notes I. Accounting for Investments in Trading Securities a. The method of reporting the acquisition of ownership shares of a company by another company depends on the purpose for holding such investments. i. Control: Indicates that consolidated financial statements should be reported by bringing together the financial information of two companies; according to U.S. GAAP, it exists when one company owns more than 50% of the outstanding common shares of another company. ii. Trading Securities: Classification of investments in stocks and bonds when management’s intentions are to buy and sell them quickly in the near term; they are reported on the balance sheet at fair value with all changes in value affecting net income. 1. When recording such investments: Debit “Investment in Trading Securities”; Credit “Cash” (Investment in Trading Securities is reported at FAIR VALUE) 2. If Dividend is received: Debit “Cash”; Credit “Dividend Revenue”
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Notes Ch 12 - Jorge Rossello Busi 100 Chapter 12 Notes I....

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