Term
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Definition
| made to earn a return on funds that may be needed for future short-term or long-term purposes |
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Term
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Definition
| the ability to have an important impact on the operating, investing, and financing policies of another company |
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Term
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Definition
| the ability to determine the operating and financing policies of another company through ownership of voting stock |
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Term
| Held-to-Maturity Investments |
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Definition
| investments in debt securities that management has the intent and ability to hold until maturity |
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Term
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Definition
| reports investments in debt securities held to maturity at cost minus any premium or plus any discount |
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Term
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Definition
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Term
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Definition
| less than the maturity amount |
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Term
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Definition
| more than the maturity amount |
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Term
| Why are passive investments reported at fair value on the balance sheet? |
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Definition
relevance - analysts may attempt to forecast a company's future cash flows
measurability - accounts record only items that can be measured in dollar terms with high degree of reliability |
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Term
| When the investment account is adjusted to reflect changes in fair value, what other account is affected when the asset account is increased or decreased? |
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Definition
| Unrealized Holding Gains or Losses |
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Term
| Unrealized Holding Gains or Losses |
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Definition
| amounts associated with price changes of securities that are currently held |
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Term
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Definition
| all investments in stocks or bonds held primarily for the purpose of active trading (buying and selling) in the near future (classified as short term) |
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Term
| Securities Available for Sale |
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Definition
| all passive investments other than trading securities and debt held to maturity (classified as short or long term) |
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Term
| Journal Entry to record the purchase of bonds |
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Definition
Debit Held-to-Maturity Investments
Credit Cash |
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Term
| Journal Entry to record the receipt of interest |
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Definition
Debit Cash
Credit Interest Revenue |
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Term
| Journal Entry to record the receipt of the principal payment |
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Definition
Debit Cash
Credit Held-to-Maturity Investments |
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Term
| Journal Entry to record the purchase of securities |
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Definition
Debit Investments in SAS
Credit Cash |
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Term
| Journal Entry to record dividends earned |
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Definition
Debit Cash
Credit Dividend Revenue |
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Term
| Other Comprehensive Income (OCI) |
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Definition
| where the net unrealized losses/gains account is reported in the stockholders' equity section of the balance sheet |
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Term
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Definition
| Cash is increased and two accounts (Investments in SAS and Net Unrealized Losses/Gains) on the balance sheet are eliminated |
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Term
| Gain or Loss on a Sale is computed as |
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Definition
| Proceeds from sale - Investment cost |
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Term
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Definition
| must be used when an investor can exert significant influence over an affiliate |
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Term
| Investments in Affiliates (or Associated Companies) |
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Definition
| investments in sotck held for the purpose of influencing the operating and financing strategies of the entity for the long term |
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Term
| Journal entry for recording the purchase of stock |
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Definition
Debit Investments in Affiliates
Credit Cash |
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Term
| Journal Entry for recording the earnings of affiliates |
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Definition
Debit Investments in Affiliates
Credit Equity in Affiliate Earnings |
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Term
| Journal Entry for recording dividends received |
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Definition
Debit Cash
Credit Investments in Affiliates |
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Term
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Definition
| acquisition of a company in which a company acquires another at a different level in the channels of distribution |
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Term
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Definition
| acquisition of a company that involves companies at the same level in the channels of distribution |
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Term
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Definition
| acquisition of a company where the operations of two companies together may be more profitable than the combined profitability of the companies as separate entities |
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Term
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Definition
| occurs when one company purchases all of the assets and liabilities of another and the acquired company goes out of business |
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Term
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Definition
| records assets and liabilities acquired in a merger or acquisition at their fair value on the transaction date |
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Term
| 2 Step process to determine how to record the company's acquisition |
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Definition
1)estimate the fair value of the acquired company's tangible assets, identifiable intangible assets, and liabilities
2)Compute goodwill |
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Term
| Goodwill (cost in excess of net assets acquired) |
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Definition
| the excess of the purchase price of a business over the fair value of the acquired company's assets and liabilities |
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Term
| When is goodwill reported? |
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Definition
| only if it is acquired in a merger or acquisition transaction |
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Term
| Economic return from Investing |
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Definition
| Dividends and Interest Received + Change in Fair Value/Fair Value of Investments (beginning of period) |
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