ch13-2010 Financial Accounting 财务会计.ppt

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1、CHAPTER 13,INVESTMENTS 投资,Study Objectives,Discuss why corporations invest in debt and stock securitiesExplain the accounting for debt investmentsExplain the accounting for stock investmentsDistinguish between short-term and long-term investments,TEMPORARY INVESTMENTS 短期投资 AND THE OPERATING CYCLE,At

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

3、ating cycle is depicted below,Cash,Accountsreceivable,inventory,Temporary Investment(capital Market),sell,invest,WHY CORPORATIONS INVEST,TEMPORARY AND LONG-TERM INVESTMENTS,Temporary investments 短期投资 are securities,held by a company,that arereadily marketable andintended to be converted into cash wi

4、thin the next year or operating cycle,whichever is longerInvestments that do not meet both criteria are classified as long-term investments 长期投资,ACCOUNTING FOR DEBT INVESTMENTS ENTRIES AT ACQUISITION,Debt investments 债券投资 are investments in government and corporation bonds.In accounting for debt inv

5、estments,entries are required to recordAcquisitioninterest revenue,andsale.,ACCOUNTING FOR DEBT INVESTMENTS ENTRIES AT ACQUISITION,At acquisition the cost principle applies,and cost includes all expenditures necessary to acquire these investmentsKuhl Corporation acquires 50 Doan Inc.12%,10-year,$1,0

6、00 bonds on January 1,2002,for$54,000,including brokerage fees of$1,000.The entry to record the investment is:,The bonds pay$3,000 interest on July 1 and January 1($50,000 X 12%X).The July 1 entry is:,It is necessary to accrue$3,000 interest earned since July 1 at year-end.The December 31 entry is:,

7、ACCOUNTING 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 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 Janua

8、ry 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:,ACCOUNTING GUIDELINES FOR STOCK INVESTMENTS 股票投资,Stock investments are investments in the capital stock of corporations.Under the different situation,the acc

9、ounting treatment will be different.,ACCOUNTING FOR STOCK INVESTMENTS HOLDINGS LESS THAN 20%,In accounting for stock investments of less than 20%,the cost method is used.The investment is recorded at costrevenue is recognized only when cash dividends are received.,ACCOUNTING FOR STOCK INVESTMENTS HO

10、LDINGS LESS THAN 20%,On July 1,2002,Sanchez Corporation acquires 1,000 shares(10%ownership)of Beal Corporation common stock at$40 per share plus brokerage fees of$500.The entry for the purchase is:,Entries are required for any cash dividends received during the time the stock is held.If a$2 per shar

11、e dividend is received by Sanchez Corporation on December 31 the entry is:,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 stock is recognized as a gain or loss.,Sanchez C

12、orporation 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:,ACCOUNTING FOR STOCK INVESTMENTS HOLDINGS BETWEEN 20%AND 50%,When an investor owns between

13、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 activities of the investeeSubsequently,the investor should record its share of the net income of the investee in the year when it is earned.,ACCOUNTING F

14、OR STOCK INVESTMENTS HOLDINGS BETWEEN 20%AND 50%,Under the equity method,the investment in common stock is initially recorded at cost;the investment account is adjusted annually to show the investors equity in the investee.,ACCOUNTING FOR STOCK INVESTMENTS HOLDINGS BETWEEN 20%AND 50%,Each year,the i

15、nvestor:debits the investment account and credits revenue for its share of the investees net income and credits dividends received to the 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:,Beck r

16、eports 2002 net income of$100,000 and declares and pays a$40,000 cash dividendMilar 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:,INVESTMENT AND REVENUE ACCOUNTS

17、AFTER POSTING,Dec 31$12,000,Jan 1$120,000Dec 31$30,000,Dec 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 than 50%of the common stock of another entity is known as a parent company母公司The enti

18、ty whose stock is owned by the parent company is called the subsidiary(affiliated)company子公司,ACCOUNTING FOR STOCK INVESTMENTS HOLDINGS OF MORE THAN 50%,The parent company is perceived to have a controlling interest控制性利益 in the subsidiary due to its stock ownershipWhen one company owns more than 50%o

19、f the common stock of another company,consolidated financial statements合并报表 are usually prepared.,VALUATION GUIDELINES 估价指南,Fair value公允价值 is the amount for which a security could be sold in a normal market and offers the best approach at investment valuation since it represents the expected cash re

20、alizable 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 into the following three categories of securities:Trading securities交易性金融资产-held with the intention of selling them

21、 in a short period of time(generally less than a month).,VALUATION AND REPORTING OF INVESTMENTS,Available-for-sale securities可供销售证券-may be sold in the future.Held-to-maturity securities持有到期证券-debt securities that the investor has the intent and ability to hold to maturity。,VALUATION OF TRADING SECUR

22、ITIES,Trading securities are reported at fair value,and changes from cost are reported as part of net incomeThe changes are reported as unrealized gains or losses since the securities have not been soldThe unrealized gain or loss is the difference between the total cost of the securities in the cate

23、gory and their total fair value,Pace 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($140,000)

24、.Fair value and the unrealized gain or loss are recorded through an adjusting entry at the time financial statements are prepared,VALUATION OF TRADING SECURITIES,A valuation allowance account,Market Adjustment-Trading,is used to record the difference between the total cost and the total fair value o

25、f the securities.The adjusting entry for Pace Corporation is:,VALUATION OF TRADING SECURITIES,The fair value of the securities is the amount reported on the balance sheetThe unrealized gain is reported on the income statement in the Other Revenues and Gains sectionThe unrealized loss is reported on

26、the income statement in the Other Expenses and Losses section,VALUATION OF AVAILABLE-FOR-SALE SECURITIES,Available-for-sale securities are held with the intention of selling them in the near future.Available-for-sale securities are reported at fair valueThe changes are reported as unrealized gains o

27、r 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,Elbert Corporation has an unrealized loss of$9,537 because total fair value($284,000)is$9,537 less than total cost($293,5

28、37).Fair value and the unrealized gain or loss are recorded through an adjusting entry at the time financial statements are preparedA 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.Th

29、e adjusting entry for Elbert Corporation is:,The fair value of the securities is the amount reported on the balance sheet.The unrealized gain or loss is reported as a separate component of stockholders equity.,UNREALIZED LOSS IN STOCKHOLDERS EQUITY SECTION,NONOPERATING ITEMS RELATED TO INVESTMENTS,T

30、emporary investments are listed immediately below cash in the current asset section of the balance sheet due to their liquidityTemporary investments are reported at fair value.Long-term investments are typically reported in a separate section of the balance sheet immediately below current assets,NONOPERATING ITEMS RELATED TO INVESTMENTS,In the income statement,the items below are reported in the non-operating section:,Homework,E13-1,E13-2P13-3A,