Answers To Wileyplus Accounting Homework

Answers To Wileyplus Accounting Homework-57
Cash............................................................................. 9,900 (b) Cash ..................................................................................... Dividend Revenue................................................... 975 (c) Securities Fair Value Adjustment (Trading)............Unrealized Holding Gain or Loss— Income [(300 X .50) – ,900]....................

Identify the three categories of debt securities and describe the accounting and reporting treatment for each category. Understand the procedures for discount and premium amortization on bond investments. Identify the categories of equity securities and describe the accounting and reporting treatment for each category. Understand the basic guidelines for accounting for derivatives. Describe the accounting for derivative financial instruments. Unrealized holding gains and losses for available-for-sale securities should be reported as other comprehensive income and as a separate component of stockholders’ equity. 17 17-2 ASSIGNMENT CHARACTERISTICS TABLE (Continued) Item Description Level of Difficulty Time (minutes) *P17-16 *P17-17 *P17-18 Fair value hedge interest rate swap. Available-for-sale: Debt securities not classified as held-to-maturity or trading securities. A debt security should be classified as held-to-maturity only if the company has both: (1) the positive intent and (2) the ability to hold those securities to maturity. Trading securities are reported at fair value, with unrealized holding gains and losses reported as part of net income. Moderate Moderate Moderate 30–40 25–35 25–35 Issues raised about investment securities. Trading: Debt securities bought and held primarily for sale in the near term to generate income on short-term price differences. Convertible debt securities and redeemable preferred stocks are not treated as equity securities. The variety in bond features along with the variability in interest rates permits investors to shop for exactly the investment that satisfies their risk, yield, and marketability desires, and permits issuers to create a debt instrument best suited to their needs. Cost includes the total consideration to acquire the investment, including brokerage fees and other costs incidental to the purchase. The three types of classifications are: Held-to-maturity: Debt securities that the enterprise has the positive intent and ability to hold to maturity. It also includes rights to acquire or dispose of an ownership interest at an agreed-upon or determinable price such as warrants, rights, and call options or put options.A convertible bond is a hybrid security because it is comprised of a debt security, referred to as the host security, combined with an option to convert the bond to shares of common stock, the embedded derivative. The voting-interest model is when a company owns more than 50% of another company. Stockholders do not absorb the losses or receive the benefits of a normal stockholder.The risk-and-reward model is when a company is involved substantially in the economics of another company. In some entities, stockholders are shielded from losses related to their primary risks, or their returns are capped or must be shared by other parties. However, if Elizabeth Corp.’s loss is not limited to its investment (due to a guarantee of Dole’s obligations or other commitment to provide further financial support or if imminent return to profitable operations by Dole appears to be assured), it is appropriate for Elizabeth Corp. Explain the equity method of accounting and compare it to the fair value method for equity securities. Describe the disclosure requirements for investments in debt and equity investments. Discuss the accounting for impairments of debt and equity investments. Describe the accounting for transfer of investment securities between categories. Securities Fair Value Adjustment (Available-for-Sale)...................... 17-5 70,000 80,000 Questions Chapter 17 (Continued) 20. should discontinue applying the equity method and not provide for additional losses beyond the carrying value of 0,000.The cash flows received on the hedging instrument (derivative) will offset the cash flows received on the hedged item.Generally, the hedged item is a transaction that is planned some time in the future (an anticipated transaction). Derivatives used in cash flow hedges are accounted for at fair value on the balance sheet but gains or losses are recorded in equity as part of other comprehensive income. A hybrid security is a security that has characteristics of both debt and equity and often is a combination of traditional and derivative financial instruments.

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