Session 25 (1) - Session25:StructuredFinancing...

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Session 25: Structured Financing  and Special Purpose Entities Hye Sun Chang ACCY 303  
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Outline Outline 1. Securitization Example  2. Common Mistakes  1) Account Name 2) Gross vs. Net Method  
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Common mistake 1 (account name) Common mistake 1 (account name) e.g. Honda Motor Corporation purchased $100 million, 7%, 10-year bonds issued by BOA for a price of $120,000,000 and classified the bonds as held-to-maturity securities. Dr. Bonds payable Dr. Premium on bonds         Cr. Cash  Dr. Investment in bonds Dr. Premium on bonds        Cr. Cash  e.g. Honda Motor Corporation purchased 5,000,000 shares of AngloGold common stock at $40 per share and classified the stock as trading securities.  Dr. Common stock       Cr. Cash  Dr. Investment in AG common  stock       Cr. Cash 
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Common mistake 1 (account name) Common mistake 1 (account name) e.g. Honda Motor Corporation received cash dividends of $3 million on the  investment in AngloGold common shares. Dr. Cash       Cr. Dividend  Dr. Cash        Cr. Dividend Revenue               or Dividend income              or Investment income Equity method?? 
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Common mistake 2 (gross vs. net method) Common mistake 2 (gross vs. net method)
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This note was uploaded on 11/08/2011 for the course ACCY 303 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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Session 25 (1) - Session25:StructuredFinancing...

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