Notes 1

Notes 1 - Gains/ losses go to I/S Unrealized gains still...

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Balance Sheet: Assets Marketable securities: o A company’s investment in the stock of another company Current assets: Trade securities Held to maturity Securities available for sale o We are interested in the buying price o Maybe interested in current market value Marked-to-market: Also shows up as gain or loss on I/S If marked-to-market: Lots of volatility in financial statements (gains/ losses) o Less volatility equals higher P/E ratio o Held to maturity: Bonds Use original cost (amortized cost) No effect on I/S o Trading securities: Use market value
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Unformatted text preview: Gains/ losses go to I/S Unrealized gains still recognized as gains/ losses in earnings (I/S) *Market value is same thing as fair value o Securities available for sale: Put gain or loss in other comprehensive income (in B/S, stockholders equity portion) Example exam question: Given investments a co. is holding at end of year, book value and market value, what values go on B/S? I/S? o FASB 115 doesnt apply to investments in consolidated subsidiaries or to investments under the equity method...
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Notes 1 - Gains/ losses go to I/S Unrealized gains still...

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