04 Short Term Assets - 17/01/2011 EngineeringFinanceand...

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17/01/2011 1 1 Engineering Finance and Economics 4. Short Term Assets 2 Agenda Short term investments Accounts receivables Notes receivables 3 Short Term Investments Marketable securities or temporary investments Investments that a company plans to hold for one year or less Most liquid after cash
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17/01/2011 2 4 5 4 Trading Investments Suppose that Loblaw buys the TransCanada shares on Dec. 18, 2008 paying $100,000 cash. December 18 Short-Term Investments 100,000 Cash 100,000 Purchased investment 5 5 5 Trading Investments On Dec. 27, Loblaw receives a cash dividend of $800 from TransCanada. Dec. 27 Cash 800 Dividend Revenue 800 Received cash dividend 6 5 6 Trading Investments Loblaw’s fiscal year ends on January 3, 2009 and the TransCanada shares have a market value of $102,000 on this date. GAIN because the market value ($102,000) is greater than Loblaw’s investment cost
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17/01/2011 3 7 5 7 Trading Investments Unrealized Gain–because Loblaw has not yet sold the investment Jan3Short term Investments 2,000 Unrealized Gain on Investments 2,000 Adjusted investment to market value 8 5 8 Trading Investments If the Loblaw investment in TransCanada shares had decreased in value to $95,000 Unrealized Loss–because Loblaw has not yet sold the investment Jan 3 Unrealized Loss on Investments 5,000 Short term Investments 5,000 Adjusted investment to market value 9 5 9 Trading Investments Balance Sheet–short term investments are current assets Income Statement – investments earn Interest Revenue or dividend revenue. All gains & losses are also reported on the income statement
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17/01/2011 4 10 5 10 Reporting on the Balance Sheet and the Income Statement Balance Sheet Current Assets: $ XXX Cash XXX Short-term investments at market value 102,000 Accounts receivable XXX Income Statement Revenues $ XXX Expenses XXX Other comprehensive income: Unrealized gain (loss) on investment 2,000 Net Income $ XXX 11 5 11 Trading Investments Suppose Loblaw sells its TransCanada shares on February 19, 2009. The sale price is $98,000. LOSS
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04 Short Term Assets - 17/01/2011 EngineeringFinanceand...

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