{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Assignment_9_-_Lecture_Notes__1

2 nd payment of interest dr interest expense 10310 dr

Info icon This preview shows pages 5–8. Sign up to view the full content.

View Full Document Right Arrow Icon
2 nd payment of interest: Dr Interest Expense 103.10 Dr Notes Payable 327.93 Cr Cash 431.03 Chapter 13 Investments 1. Trading securities Purchased/Sold to make a profit. Part of the daily operations of the business. E.g. Banks, investment companies, insurance companies, day traders Current asset Valued at fair value as unrealized gain/(loss) o Balance Sheet: current asset with an allowance account o Income Statement: included on income statement 2. Held-to-maturity securities Debt investments (eg. bonds, notes) Held until the maturity date o Must have a maturity date – stocks do not. Valued at cost, plus premium or minus discount o Balance Sheet: current or investment asset 3. Available-for-sale securities Bonds or notes not intended to be held to maturity. Equity securities (stocks) not for quick profits. Valued at fair value as unrealized gain/(loss) o Balance Sheet: current or investment asset with an allowance account. o Income Statement: NOT included on income statement
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
o Unrealized gain/(loss) reported straight to stockholders’ equity (bypasses the income statement) Fair Value Accounting 1. This is a hot topic in accounting FASB 159 o New Financial Accounting Standard (2007) o Requires mortgages to be valued at fair value o Many blame FASB 159 for the collapse of the banking industry in 2008. Mortgages had to be valued on the balance sheet at the lower of the appraised value of the house or the amount able to be collected on the mortgage. If either are present, the asset must decrease and equity will decrease. o Leaman Brothers and AIG both had to revalue their assets to fair value leaving them with no equity. o Major difference between US accounting and international accounting is the valuation of assets. o
Image of page 6
2. Valuation of assets Some assets are valued at fair value and some at cost. Cost concept: o The asset is recorded at cost and remains at cost until disposal. o Conservative principle o The asset does change in value on the balance sheet Fair value o The asset is recorded at cost with the value changing depending on market fluctuations. o Allowance accounts adjust assets to fair value. 3. The trend is moving towards fair value accounting Negative: brings subjective opinion into the financial statements Available-for-sale Investments Business A buys the stocks of business B.
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern