Analyzing Securities - Unit 4 IP

Investments chapter 13 nd to record the semiannual

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the bond value to the FMV. (Investments, Chapter 13, n.d.) To record the semiannual bond interest received on December 31 st , at 10% of its cost the accountant debits (increases) cash and credits Interest Revenue for $1250.00 ($25,000 x 10% x 6/12). It is essential to record the interest accrued as well; debit (increase) Interest Receivable and credit (increase) Interest Revenue. Now the time has come and the Fish’s Corporation has sold the bond. The FMV is greater at this point than the cost price. The accountant records the net proceeds with a journal entry; a dr. (increase) of $30,000.00 to the cash account, credit (decrease) of $25,000.00 to the Investment asset account and a credit (increase) to the Realized Gains on Sale of an Asset’s income account. (Accounting for Debt Securities, 2013). If the Fish Corporation sold its stock investment than the accountant would record the sale similarly to the securities sale; however, one difference would be a credit to the Investment (equity account) instead of reducing the Asset account; Trading Securities in this case. Investors/companies have one main objective in mind. A high yield, they are constantly searching for ways to generate residual income. Some investments are riskier than others. There is an ebb and flow concerning when one or another strategy produces a higher return. This memo was geared more toward the basic entries to record Investment tendencies. Understanding the fundamentals of these transactions prepares an accountant for more arduous ones in the long run.
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5 References: Accounting for Debt Securities. (2013). Retrieved from. http://www.cliffsnotes.com/study_guide Accounting for Equity Securities. (2013). Retrieved from. http://www.cliffnotes.com/study_guide Balance Sheet: Classification, Valuation. (2013). Retrieved from. http://www.cliffnotes.com/study_guide Investments, Chapter 13. (n.d.). Retrieved from.facweb.northseattle.edu Investments in Debt and Equity Securities. (n.d.). Retrieved from.highered.mcgraw-hill.com The Equity Method of Accounting for Investments. (n.d). Retrieved from.highered.mcgraw- hill.com
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