多媒体课件-中级财务会计.pptx
Chapter 7 Investments,Liuyang LiIntermediate Financial Accounting II,How would a company invest in others?,Li,Liuyang 2016-2017-2,Chapter Outline,Li,Liuyang 2016-2017-2,Classification,The investor lacks significant influence over the investee:Equity ownership 50%,Li,Liuyang 2016-2017-2,How would we treat the three kinds of investments?,Li,Liuyang 2016-2017-2,Investor Lacks Significant Influence,Typically,the investor owns less than 20%of other companies stock:Held-to-Maturity(HTM)SecuritiesTrading Securities(TS)Securities Available-For-Sale(AFS),Li,Liuyang 2016-2017-2,Investor Controls the Investee,Equity MethodTypically,the investor owns between 20%and 50%of the voting stock of the investee.,Investor Has Significant Influence,ConsolidationTypically,the investor owns more than 50%of the investee.,Li,Liuyang 2016-2017-2,#1:Securities to be Held-to-Maturity(HTM),What?Investments in debt securities for which the investor has the“positive intent and ability”to hold to maturity.Hold to MaturityInvestor will not sell the investment before maturity date.Debt SecuritiesHTM securities only refer to bonds.Why?Because stock do not have maturity date.,Li,Liuyang 2016-2017-2,#2:Trading Securities(TS),What?Trading securities are actively managed in a trading account for the purpose of profiting from short-term price changes.Actively ManagedFrequently buy and sell securities.Purpose to HoldExpect to earn profits on short-term differences in price.Trading securities can either be bonds or stocks.,Li,Liuyang 2016-2017-2,#3:Available for Sale(AFS)Securities,What?When a company acquires an investment,not for an active trading account or to be held to maturity,the company classifies its investment as AFS securities.AFS securities can either be bonds or stocks.,Li,Liuyang 2016-2017-2,Report for the Investment,Li,Liuyang 2016-2017-2,Four Events in Investment,Li,Liuyang 2016-2017-2,HTM Bond Case Study 1,Purchased Masterwear Industries 12%,3-year(from July 1,2011 to June 30,2014)bonds for$700,000.The face amount was$700,000.Interest is payable semiannually on June 30 and December 31.The market rate is 12%.(Suppose its a HTM).Consider the four events occurring during the holding period and make the journal entries.,Li,Liuyang 2016-2017-2,Case Study 1,Purchasing the investment(July 1,2011)Dr.Investment in bonds700,000Cr.Cash700,000Recognizing investment revenue On Dec 31,2011:Dr.Cash42,000Cr.Investment revenue42,000 On June 30,2012:Dr.Cash42,000Cr.Investment revenue42,000,Li,Liuyang 2016-2017-2,Case Study 1,Recognizing“unrealized gains and losses”No entrySelling the investment(at maturity date)On June 30,2014:Dr.Cash42,000Cr.Investment revenue42,000 Dr.Cash700,000Cr.Investment in bond700,000,Li,Liuyang 2016-2017-2,HTM Bond Case Study 2,Purchased Masterwear Industries 12%,3-year(from July 1,2011 to June 30,2014)bonds for$666,633.The face amount was$700,000.Interest is payable semiannually on June 30 and December 31.The market rate is 14%.(Suppose its a HTM)Consider the four events occurring during the holding period and make the journal entries.,Li,Liuyang 2016-2017-2,Case Study 2,Purchasing the investment(July 1,2011)Dr.Investment in bonds700,000Cr.Cash666,633 Discount on bond investment 33,367Recognizing investment revenue On Dec 31,2011:Dr.Cash42,000 Discount on bond investment 4,664Cr.Investment revenue46,664 On June 30,2012:Dr.Cash42,000 Discount on bond investment 4,991Cr.Investment revenue46,991,Li,Liuyang 2016-2017-2,Case Study 2,On June 30,2012:Dr.Cash42,000 Discount on bond investment 5,340Cr.Investment revenue47,340Recognizing“unrealized gains and losses”No entrySelling the investment On June 30,2014:(On the maturity date)Dr.Cash42,000 Discount on bond investment 6,544Cr.Investment revenue48,544 Dr.Cash700,000Cr.Investment in bond700,000,Li,Liuyang 2016-2017-2,Case Study 2,If we sell those bonds for$725,000 on January 15,2012.On Jan.15,2012:(Not on the maturity date)Dr.Cash725,000 Discount on bond investment 28,703 Cr.Investment in bonds700,000 Gain on sale of investments 53,703,Li,Liuyang 2016-2017-2,HTM Bond Case Study 3,Purchased Masterwear Industries 12%,3-year(from July 1,2011 to June 30,2014)bonds for$735,533.The face amount was$700,000.Interest is payable semiannually on June 30 and December 31.The market rate is 10%.(Suppose its a HTM)Consider the four events occurring during the holding period and make the journal entries.,Li,Liuyang 2016-2017-2,Case Study 3,Purchasing the investment(July 1,2011)Dr.Investment in bonds700,000Premium on bond investment 35,533Cr.Cash735,533Recognizing investment revenue On Dec 31,2011:Dr.Cash42,000Cr.Investment revenue36,777 Premium on bond investment5,223 On June 30,2012:Dr.Cash42,000Cr.Investment revenue36,516 Premium on bond investment5,484,Li,Liuyang 2016-2017-2,Case Study 3,On June 30,2012:Dr.Cash42,000Cr.Investment revenue36,241 Premium on bond investment5,759Recognizing“unrealized gains and losses”No entrySelling the investment On June 30,2014:(On the maturity date)Dr.Cash42,000Cr.Investment revenue35,329 Premium on bond investment6,671 Dr.Cash700,000Cr.Investment in bond700,000,Li,Liuyang 2016-2017-2,Conclusion Four Events,Purchasing the investment:If we purchase bonds(three conditions)Bonds are issued at face value:price=face amount Dr.Investment in bonds Cr.CashBonds are issued at a discount:price face amount Dr.Investment in bonds Premium on bond investment Cr.Cash,Li,Liuyang 2016-2017-2,Conclusion Four Events,Recognizing investment revenue:Three ConditionsIssued at face value:stated rate=market rate Dr.Cash Cr.Investment revenueIssued at a discount:stated rate market rate Dr.Cash(stated rate face amount)Cr.Investment revenue(market rate amortized cost)Premium on bond investment,Li,Liuyang 2016-2017-2,Conclusion Four Events,Holding the investment during periods in which the investments fair value changes(Recognizing“unrealized holding gains and losses”)For HTM securities,we do not recognize any“unrealized holding gains and losses”.No entry.,Li,Liuyang 2016-2017-2,Conclusion Four Events,Selling the investment(sell it before maturity date):Three ConditionsBonds are issued at face value:Dr.Cash Cr.Investment in bonds Gain on sale of investmentsBonds are issued at discount:Dr.Cash Discount on bond investment Cr.Investment in bonds Gain on sale of investmentsBonds are issued at premium:Dr.Cash Cr.Investment in bonds Premium on bond investment Gain on sale of investments,Li,Liuyang 2016-2017-2,Homework,Reading book:chapter 7 part AP318 BE 7-1,Li,Liuyang 2016-2017-2,Key Words,Held-to-Maturity Securities 持有至到期投资Trading Securities 交易性证券Available-for-Sale Securities 可供出售证券Equity method 权益法Consolidation 合并Stated rate 票面利率Market rate 市场利率,Li,Liuyang 2016-2017-2,Thank You!,Li,Liuyang 2016-2017-2,
