ch13FinancialAccounting財(cái)務(wù)會(huì)計(jì)

1、chapter 13investments 投資投資study objectives discuss why corporations invest in debt and stock securities explain the accounting for debt investments explain the accounting for stock investments distinguish between short-term and long-term investmentstemporary investments 短期投資短期投資 and the operating cy

2、cle at the end of their operating cycles, many companies may have temporarily idle cash on hand pending the start of the next operating cycle until the cash is needed in operations, these companies may invest the excess funds to earn interest and dividends the relationship of temporary investments t

3、o the operating cycle is depicted belowcash accountsreceivableinventorytemporary investment(capital market ) sell investwhy corporations investreason example to house excess cash until needed government bonds to generate earnings banking bonds to meet strategic goals stockstemporary and long-term in

4、vestments temporary investments 短期投資短期投資 are securities, held by a company, that are- readily marketable and- intended to be converted into cash within the next year or operating cycle, whichever is longer investments that do not meet both criteria are classified as long-term investments 長期投資長期投資acc

5、ounting for debt investments entries at acquisition debt investments 債券投資債券投資 are investments in government and corporation bonds. in accounting for debt investments, entries are required to record- acquisition- interest revenue, and- sale.accounting for debt investments entries at acquisition at ac

6、quisition the cost principle applies, and cost includes all expenditures necessary to acquire these investments kuhl corporation acquires 50 doan inc. 12%, 10-year, $1,000 bonds on january 1, 2002, for $54,000, including brokerage fees of $1,000. the entry to record the investment is:date accounts d

7、rcrjan1 debt investments 54,000 cash 54,000the bonds pay $3,000 interest on july 1 and january 1 ($50,000 x 12% x ). the july 1 entry is: date accounts drcrjuly1 cash 3,000 interest revenue 3,000it is necessary to accrue $3,000 interest earned since july 1 at year-end. the december 31 entry is:date

8、accounts drcrdec31 interest receivable 3,000 interest revenue 3,000date accounts drcrjan1 cash 3,000 interest receivable 3,000accounting for debt investments entries for sale of bonds any difference between the net proceeds (sales price less brokerage fees) from the sale of bonds and the cost of the

9、 bonds is recorded as a gain or loss. kuhl corporation receives net proceeds of $58,000 on the sale of the doan inc. bonds on january 1, 2003, after receiving the interest due. since the securities cost $54,000, a gain of $4,000 has been realized. the entry to record the sale is:date accounts drcrja

10、n1 cash 58,000 debt investment 54,000 gain on the sale of debt investment 4,000accounting guidelines for stock investments 股票投資股票投資 stock investments are investments in the capital stock of corporations. under the different situation, the accounting treatment will be different. investors ownership i

11、nterest in investees common stock presumed influence on investee accountingguidelines less than 20% insignificant cost method成本法成本法between 20% and 50% significant equity method 權(quán)益法權(quán)益法more than 50% controlling consolidated financial statement 合并財(cái)務(wù)報(bào)表合并財(cái)務(wù)報(bào)表accounting for stock investments holdings less

12、 than 20% in accounting for stock investments of less than 20%, the cost method is used. the investment is recorded at cost revenue is recognized only when cash dividends are received.accounting for stock investments holdings less than 20%on july 1, 2002, sanchez corporation acquires 1,000 shares (1

13、0% ownership) of beal corporation common stock at $40 per share plus brokerage fees of $500. the entry for the purchase is:date accounts drcrjuly1 stock investment 40,500 cash 40,500 entries are required for any cash dividends received during the time the stock is held. if a $2 per share dividend is

14、 received by sanchez corporation on december 31 the entry is:date accounts drcrdec 31 cash 2,000 dividend revenue 2,000 dividend revenue is reported under other revenue and gains in the income statement. when stock is sold, the difference between the net proceeds from the sale and the cost of the st

15、ock is recognized as a gain or loss. sanchez corporation receives net proceeds of $39,500 on the sale of its beal corporation common stock on february 10, 2003. because the stock cost $40,500, a loss of $1,000 has been incurred. the entry to record the sale is:date accounts drcrfeb 10 cash 39,500los

16、s on sale of stock investment 1,000 stock investment 40,500accounting for stock investments holdings between 20% and 50% when an investor owns between 20% and 50% of the common stock of a corporation, it is usually presumed that the investor has significant influence over the financial and operating

17、 activities of the investee subsequently, the investor should record its share of the net income of the investee in the year when it is earned.accounting for stock investments holdings between 20% and 50% under the equity method, the investment in common stock is initially recorded at cost; the inve

18、stment account is adjusted annually to show the investors equity in the investee. accounting for stock investments holdings between 20% and 50% each year, the investor:- debits the investment account and credits revenue for its share of the investees net income and - credits dividends received to th

19、e investment account milar corporation acquires 30% of the common stock of beck company for $120,000 on january 1, 2002. the entry to record this transaction is:date accounts drcrjan 1 stock investment 120,000 cash 120,000 beck reports 2002 net income of $100,000 and declares and pays a $40,000 cash

20、 dividend milar is required to record:- its share of becks net income, $30,000 (30% x $100,000) and - the reduction in the investment account for the dividends received, $12,000 ($40,000 x 30%).- the entries are:date accounts drcrdec 31 stock investment 30,000 revenue from investment30,000date accou

21、nts drcrjan 1 cash 12,000 stock investment 12,000 investment and revenue accounts after postingdec 31 $12,000 jan 1 $120,000dec 31 $30,000dec 31 $138,000 stock investment dec 31 $30,000 revenue from stock investment accounting for stock investments holdings of more than 50% a company that owns more

22、than 50% of the common stock of another entity is known as a parent company母公司母公司 the entity whose stock is owned by the parent company is called the subsidiary (affiliated) company子公司子公司accounting for stock investments holdings of more than 50% the parent company is perceived to have a controlling

23、interest控制性利益控制性利益 in the subsidiary due to its stock ownership when one company owns more than 50% of the common stock of another company, consolidated financial statements合并報(bào)表合并報(bào)表 are usually prepared.valuation guidelines 估價(jià)指南估價(jià)指南 fair value公允價(jià)值公允價(jià)值 is the amount for which a security could be sold

24、 in a normal market and offers the best approach at investment valuation since it represents the expected cash realizable value of the securities.valuation and reporting of investments for purposes of valuation and reporting at a financial statement date, debt and stock investments are classified in

25、to the following three categories of securities:- trading securities交易性金融資產(chǎn)交易性金融資產(chǎn) - held with the intention of selling them in a short period of time (generally less than a month). valuation and reporting of investments- available-for-sale securities可供銷售證券可供銷售證券 - may be sold in the future.- held-t

26、o-maturity securities持有到期證券持有到期證券 - debt securities that the investor has the intent and ability to hold to maturity。valuation of trading securities trading securities are reported at fair value, and changes from cost are reported as part of net income the changes are reported as unrealized gains or

27、 losses since the securities have not been sold the unrealized gain or loss is the difference between the total cost of the securities in the category and their total fair value trade securities , dec 31, 2002 investment cost fair value unearned gain (loss ) bonds 50,00048,000(2,000) stock 90,00099,

28、0009,000total 140,000147,0007,000pace corporation has the following costs and fair values for its investments classified as trading securities:valuation of trading securities pace corporation has an unrealized gain of $7,000 because total fair value ($147,000) is $7,000 greater than total cost ($140

29、,000). fair value and the unrealized gain or loss are recorded through an adjusting entry at the time financial statements are preparedvaluation of trading securities a valuation allowance account, market adjustment - trading, is used to record the difference between the total cost and the total fai

30、r value of the securities. the adjusting entry for pace corporation is:date accounts drcrdec 31 market adjustment- trading 7,000 unrealized gain 7,000valuation of trading securities the fair value of the securities is the amount reported on the balance sheet the unrealized gain is reported on the in

31、come statement in the other revenues and gains section the unrealized loss is reported on the income statement in the other expenses and losses sectionvaluation of available-for-sale securities available-for-sale securities are held with the intention of selling them in the near future. available-fo

32、r-sale securities are reported at fair value the changes are reported as unrealized gains or losses since the securities have not been sold. the unrealized gain or loss is the difference between the total cost of the securities in the category and their total fair value available-for-sale securities

33、 , dec 31, 2002 investment cost fair value unearned gain (loss ) bonds 93,537103,60010,063stock 200,000180,400(19,600)total 293,537284,000(9,537) elbert corporation has an unrealized loss of $9,537 because total fair value ($284,000) is $9,537 less than total cost ($293,537). fair value and the unre

34、alized gain or loss are recorded through an adjusting entry at the time financial statements are prepared a valuation allowance account, market adjustment - available-for-sale, is used to record the difference between the total cost and the total fair value of the securities. the adjusting entry for elbert corporation is:date accou