Investing Basics
True or false: Current investments are easily marketable
True
What are the three types of debt investments?
Trading, HTM, AFS
When a company initially acquires any debt investment, what value is it recorded at?
Cost
What are the three types of equity investments?
Insignificant, Significant, Controlling
What type of equity investment is held at fair value?
Insignificant
Debt securities reflect what type of relationship?
Creditor
What type of debt security is always current?
Trading
What account do you use to record a HTM debt investment?
Debt investments - HTM
What account do you use to record an insignificant equity invesmtent?
Stock investments
What type of financial statements do controlling investments prepare?
Consolidated financial statements
When does a cash equivalent mature?
Within 3 months
Which debt investments are held at fair value?
Trading and AFS
What value are HTM debt investments reported at on the balance sheet?
Cost
What method do you use to account for significant equity investments?
Equity method
Company A owns 75% of Company B. Company A is the parent and Company B is the __________.
Subsidiary
Where would a long term investment be reported on the balance sheet?
Noncurrent or long term assets
When do you record a fair value adjustment?
At the end of the accounting period
What formula do you use to calculate interest received on a bond investment?
Par value * interest rate * time
Using the equity method, what account do you use to recognize share of earnings?
Earnings from Equity Method Investments
Using the equity method, when dividends are declared what account do you credit?
Equity method investments
What is an example of an equity investment?
Company stock
If you record an unrealized gain, do you debit or credit the fair value adjustment account?
Debit
What are AFS securities?
Securities that are not intended to be held until maturity or actively traded.
Company A owns 30% of Company B. Company B declares dividends of $2,500. How much of that dividend will Company A recognize?
$750
Company A has a significant investment with an original cost of $1,000 and recorded a share of earnings of $760 and dividends of $430. What is the book value of their investment?
$1,330