Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter C, Problem 7DQ
Summary Introduction
Concept Introduction:
Available for sale debt securities are the investments in debt securities that are not classified under held to maturity or trading debt securities categories. These investments are recorded using the fair value valuation method.
To indicate: the
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Under IFRS, a company:
a. should evaluate only equity investments for impairment.
b. accounts for an impairment as an unrealized loss, and includes it as a part of other comprehensive income and as a component of other accumulated comprehensive income until realized.
c. calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued interest and the expected future cash flows discounted at the investment's historical effective-interest rate.
d. All of the above.
When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be ________.
treated as a prior period adjustment
treated as an adjustment of additional paid-in-capital
reflected currently in income
Recording Entries for Impairment-AFS
Determine the amount of impairment loss (if any) to record in income under the following three separate
scenarios for an AFS debt investment. In all three cases, the company does not intend to sell and does
not believe it is more likely than not that it will be required to sell the investment before recovery of any
unrealized loss. Assume that the company has already adjusted the AFS investments to fair value
through OCI.
Scenario
Fair value
$
Amortized cost
$
Expected credit loss $
Impairment loss $
1
216,000 $
192,000 $
36,000 $
0$
2
168,000 $
192,000 $
36,000 $
24,000 $
3
144,000
192,000
36,000
12,000 x
Chapter C Solutions
Loose Leaf for Financial Accounting: Information for Decisions
Ch. C - Under what two conditions should investments be...Ch. C - Prob. 2DQCh. C - Prob. 3DQCh. C - Identify the three classes of debt investments and...Ch. C - Prob. 5DQCh. C - Prob. 6DQCh. C - Prob. 7DQCh. C - Prob. 8DQCh. C - Prob. 9DQCh. C - Prob. 10DQ
Ch. C - Prob. 11DQCh. C - Prob. 12DQCh. C - Prob. 13DQCh. C - Prob. 14DQCh. C - Which of the following statements a through g are...Ch. C - Prob. 2QSCh. C - Prob. 3QSCh. C - Prob. 4QSCh. C - Prob. 5QSCh. C - Prob. 6QSCh. C - Journ Co. purchased short-term investments in...Ch. C - Prob. 8QSCh. C - Prob. 9QSCh. C - Prob. 10QSCh. C - Prob. 11QSCh. C - Prob. 12QSCh. C - Complete the following descriptions by filling in...Ch. C - Complete the following descriptions by filling in...Ch. C - Prob. 15QSCh. C - Prob. 17QSCh. C - Complete the following descriptions by filling in...Ch. C - Prob. 2ECh. C - Prob. 4ECh. C - Prob. 5ECh. C - Prob. 6ECh. C - Prob. 7ECh. C - Use the following information of Prescrip Co. to...Ch. C - Prob. 9ECh. C - Prob. 10ECh. C - Prob. 12ECh. C - Complete the following descriptions by filling in...Ch. C - Prob. 14ECh. C - Prob. 1PSACh. C - Prob. 3PSACh. C - Prob. 4PSACh. C - Prob. 5PSACh. C - Prob. 6PSACh. C - Prob. 1PSBCh. C - Prob. 3PSBCh. C - Prob. 4PSBCh. C - Prob. 5PSBCh. C - Prob. 6PSBCh. C - Prob. CSPCh. C - Prob. 1GLPCh. C - Prob. 2GLPCh. C - Prob. 1FSACh. C - Prob. 2FSACh. C - Prob. 3FSACh. C - Prob. 2BTN
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- When do companies recognize gains and losses from the extinguishment of debt? Where are the gains and losses disclosed on the income statement?arrow_forwardimpairments on financial instruments are ? A) recognized as a realized loss if the impairment is judged to be temporary B) based on discounted cash flows for securities C) based on fair value for available-for-sale investments and negotiated values for hel-to-maturity investments D) evaluated using the CECL model similiar to receivablesarrow_forwardWhat amount of unrealized loss should be recognized in the 2020 income statement? What amount should be reported as realized gain on the sale of trading securities in the 2021 income statement?arrow_forward
- Which of the following will be affected by an increase in the provision for doubtful debts? Gross profit Operating profit Closing inventory Net book value of non-current assetsarrow_forwardIf a company invests in the debt instrument of another entity, any premium or discount is: Select one: a. included in other comprehensive income and amortized over the life of the instrument. b. included in the carrying value of the instrument and not amortized. c. amortized as part of interest income over the life of the instrument. d. immediately expensed to income.arrow_forwardRecording Entries for Impairment-AFS Determine the amount of impairment loss (if any) to record in income under the following three separate scenarios for an AFS debt investment. In all three cases, the company does not intend to sell and does not believe it is more likely than not that it will be required to sell the investment before recovery unrealized loss. Assume that the company has already adjusted the AFS investments to fair value through OCI. Scenario of any 1 2 3 Fair value 162,000126,000108,000 144,000144,000144,000 Expected credit loss27,000 27,000 27,000 ??? Amortized cost Impairment loss ??? ???arrow_forward
- Which statement is not true? Equity investment and trading debt investment have the same accounting about how to report their unrealized gain/loss and how to report them on the balance sheet. Only debt securities, not equity securities, can be classified as held-to-maturity, available-for-sale or trading. Change in fair value of available-for-sale and held-to-maturity debt investments have no impact on net income. Cash flows relating to held-to-maturity investments and trading investments involve both investing and operating activities.arrow_forwardIf in subsequent period, there is objective evidence of recovery in impairment previously recognized for debt investments measured at amortized cost, the amount of the reversal: shall not be recognized. shall be recognized in profit or loss. shall be recognized in equity. shall be recognized when the asset is derecognized.arrow_forwardMerchandise sold by Lang Company to its customers last year amounted to $13,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were a. b. C. d. Select one: a. $13,350,000. b. $13,720,000. C. $13,175,000. d. $13,035,000.arrow_forward
- Which of the following would NOT be classified as a current asset on a classified balance sheet? Group of answer choices Prepaid expenses Short-term investments Investment securities (trading) Intangible assetsarrow_forwardWhen a company acquires an affiliated company’s debt instruments from a third party, how is the gain or loss on extinguishment of the debt calculated? When should this balance be recognized?arrow_forwardWhen investments measured at amortized cost are reclassified to FVOCI, the gain or loss recognized in profit or loss is equal to * a. zero b. the amount realized to date c. the amount from beginning of period to reclassification date d.the amount from acquisition date to reclassification date e.none of the abovearrow_forward
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