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Accounting Chapter 17
CH 17
19
Accounting
Undergraduate 3
04/04/2010

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Cards

Term
Why invest in securities by other companies?
Definition
1. Earn high rate of return
2. Secure certain operating or financing arrangements with another company
Term
Define debt securities:
Definition
Represents a creditor relationship with another entity
Term
What are held-to-maturity securities?
Definition
Debt securities that the company has
1. the positive intent
2. The ability to hold to maturity.
Term
Trading securities
Definition
Debt securities bought and held primarily for sale in the near term to generate income on short-term price differences
Term
Available-for-sale define
Definition
Debt securities not classified as held-to-maturity or trading securities
Term
What kind of securities can be classified as held-to-maturity?
Definition
Only debt securities
Term
What are held-to-maturity securities accounted for at? (amortized cost or fair value)
Definition
amortized cost
Term
What are the 5 examples of debt securities?
Definition
U.S. Government securities
Municipal Securities
Corporate Bonds
Convertible Debts
Commercial Paper
Term
How do companies report available-for-sale securities? is it on the BS or the Income Statement? When is it realized
Definition
They record it on the Balance sheet, and then only on the income statement when it is realized.
Term
What statement (income or equity) is adjusted when using available for sale?
Definition
The equity of UNREALIZED HOLDINGS GAIN OR LOSS - EQUITY
Term
What statement (income or equity) is adjusted when using trading securities?
Definition
The equity of UNREALIZED HOLDINGS GAIN OR LOSS - INCOME
Term
What are Available-for-sale securities accounted for at?
Definition
Fair Value
Term
What are Trading securities accounted for at?
Definition
Fair Value
Term
While having a 20% investment in another corporation what method do you use to report investments in equity securities?
Definition
Use the Fair Value method
Term
While having a 20%-50% investment in another corporation what method do you use to report investments in equity securities?
Definition
Use the equity method
Term
While having a 50+% investment in another corporation what method do you use to report investments in equity securities?
Definition
Consolidation statement
Term
When a corporation owns more than 50% of a another corporation what is it called?
Definition
A parent company
Term
When a corporation is owned by another corporation with more than 50% control over them what are they called?
Definition
Subsidiary
Term
Where are investments reported on the books at?
Definition
The parent company's long-term investments
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