Chapter 17 Solutions (4) - Chapter 17 Solutions Questions...

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Chapter 17 Solutions Questions 4. The three types of classifications are: Held-to-maturity: Debt securities that the enterprise has the positive intent and ability to hold to maturity. Trading: Debt securities bought and held primarily for sale in the near term to generate income on short-term price differences. Available-for-sale: Debt securities not classified as held-to-maturity or trading securities. 7. Trading and available-for-sale securities should be reported at fair value, whereas held-to- maturity securities should be reported at amortized cost. 8. $3,500,000 X 10% = $350,000; $350,000 ÷ 2 = $175,000. Wheeler would make the following entry: Cash ($4,000,000 X 8% X 1 / 2 ).............................................................. 160,000 Bond Investment. .................................................................................. 15,000 Interest Revenue ($3,500,000 X 10% X 1 / 2 )..................................... 175,000 9. Securities Fair Value Adjustment (Available-for-Sale). ................................ 89,000 Unrealized Holding Gain or Loss—Equity [$3,604,000 – ($3,500,000 + $15,000)*]. .......................................... 89,000 *See number 8. 16. Significant influence over an investee may result from representation on the board of directors, participation in policy-making processes, material intercompany transactions, interchange of managerial personnel, or technological dependency. An investment (direct or indirect) of 20% or more of the voting stock of an investee constitutes significant influence unless there exists evidence to the contrary. 19. Dividends subsequent to acquisition should be accounted for as a reduction in the investment in common stock account. BRIEF EXERCISE 17-1 (a) Held-to-Maturity Securities. ....................................... 74,086 Cash. ..................................................................... 74,086 (b) Cash ($80,000 X .09). ................................................... 7,200 Held-to-Maturity Securities. ....................................... 949 Interest Revenue ($74,086 X .11). ....................... 8,149
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BRIEF EXERCISE 17-2 (a) Available-for-Sale Securities. ..................................... 74,086 Cash. ..................................................................... 74,086 (b) Cash ($80,000 X .09). ................................................... 7,200 Available-for-Sale Securities. ..................................... 949 Interest Revenue ($74,086 X .11). ....................... 8,149 (c) Securities Fair Value Adjustment (AFS). .................. 465 Unrealized Holding Gain or Loss—Equity [($74,086 + $949) – $75,500]. ........................... 465 BRIEF EXERCISE 17-3 (a) Held-to-Maturity Securities. ....................................... 65,118 Cash. ..................................................................... 65,118
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This note was uploaded on 11/30/2011 for the course ACCOUNTING 323 taught by Professor None during the Spring '10 term at Prince George's Community College, Largo.

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Chapter 17 Solutions (4) - Chapter 17 Solutions Questions...

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