Kế toán, kiểm toán - Investments in stocks and bonds

Investments in Stocks and BondsOverview of FASB No. 115Requires most investment securities to be valued at marketSecurities classified into three categoriesHeld-to-maturityOnly debt securities that will be held to maturity dateOverview of FASB No. 115Trading securitiesDebt and equity securities that are purchased and sold for short-term profitsAvailable-for-saleAll debt and equity securities not classified as held-to-maturity or tradingShort-term InvestmentsReadily saleable securitiesManagement intends to sell within one yearAll three of FASB 115 categories applyShort-term Investments in Stocks (Trading)PurchaseRecord cost in Short-term Investment accountCash dividendsRecord revenue upon receipt of dividendStock dividends and splitsNo entry and calculate new costShort-term Investments in Stocks (Trading)SaleIncrease Cash for proceedsDecrease Investment account by costRecord Realized Gain(Loss) on Investment for differenceUnrealized Gain or Loss (Trading)Valuation for financial statementsAdjust Investment account to marketRecord Unrealized Gain(Loss) for changeUnrealized gain or loss shown on income statementSubsequent Sale (Trading)When sold after adjustment to marketRealized gain or loss is difference between market at date of sale and amount security adjusted to at last financial statement dateShort-term Investments in Bonds (Trading)PurchaseRecord cost in Short-term Investment accountInterest accruals and receiptsInterest revenue accrued at appropriate datesNo amortization of premium or discountsShort-term Investments in Bonds (Trading)SaleIncrease Cash for proceedsAccrue interest revenue to date of saleDecrease Investment account by costRecord Realized Gain(Loss) on Investment for differenceUnrealized Gain or Loss (Trading)Valuation for financial statementsAdjust Investment account to marketRecord Unrealized Gain(Loss) for changeUnrealized gain or loss shown on income statementSubsequent Sale (Trading)When sold after adjustment to marketRealized gain or loss is difference between market at date of sale and amount security adjusted to at last financial statement dateInvestments in Available-For-Sale SecuritiesAcquired as short-term or long-term investmentWhen available-for-sale bonds held as long-term, premium or discount should be amortized as adjustment to interest revenueInvestments in Available-For-Sale SecuritiesAccounting similar to trading except:Unrealized gains or losses reported as a separate component of stockholders’ equityWhen sold, realized gain or loss is difference between proceeds and original costUnrealized gain or loss closedLong-term Investments in StocksOwn less than 20% of voting stockOwn 20-50% of voting stockOwn more than 50% of voting stockMarket value methodEquity methodPrepare consolidated statementsEquity Method of AccountingInvestment initially recorded at costReceipt of dividendsReduces investment accountNo revenueEquity Method of AccountingInvestee reported incomeIncrease Investment by investor’s shareReport share of investee income as incomeInvestee reported lossDecrease Investment by shareReport share as lossInvestment in Bonds Held-to-MaturityFASB 115 states must not be any foreseeable intent to sell bonds before maturity dateAccounting is mirror image of accounting for long-term debtReported in financial statements at amortized costAnalyzing InformationWhat is overall percent of total assets invested in current and noncurrent securities?What is mix of trading, available-for-sale, and held-to-maturity investments?Analyzing InformationHas company been successful in generating additional income from investments?How does current market value and cost compare?Is there good range of maturity dates?Analyzing InformationIf equity securities accounted for using equity methoddoes significant influence exist?how much of share of income has been received as dividends?