Accounting for Investments Reporting of Unrealized holding Method Gains and losses Investment in debt securities 1. Trading Fair value Net Income 2. Available for sale Fair value Other comprehen- SIve income 3. Held to maturity Amortized cost Not recognized
Reporting of Unrealized Holding Method Gains and Losses Investment in Debt Securities 1. Trading Fair value Net Income 2. Available for sale Fair value Other comprehensive income 3. Held to maturity Amortized cost Not recognized Intermediate Accounting 12 Investments Accounting for Investments
Intermediate Accounting 12 Investments 2 Investments in Available-for-sale Debt and Equity Securities v The investment is initially recorded at cost Y It is subsequently reported at fair value Y Unrealized holding gains and losses are reported as a component of other comprehensive income v nterest and dividend revenue. as well as realized gains and losses on sales, are included in net income for the current period
2. Investments in Available-for-Sale Debt and Equity Securities ✓ The investment is initially recorded at cost. ✓ It is subsequently reported at fair value. ✓ Unrealized holding gains and losses are reported as a component of other comprehensive income. ✓ Interest and dividend revenue, as well as realized gains and losses on sales, are included in net income for the current period. Intermediate Accounting 12 Investments
Intermediate Accounting 12 Investments Investments in Available for-Sale debt and Equity securities Kent Company purchases the following securities on May 1, 2003 as an investment in available-for- sale securities 100 shares of a company common stock at 50 per share s5,000 300 shares of b company common stock at $80 per share 24,000 200 shares of Company C preferred stock at $120 per share 24.000 $15,000 Company D 10% bonds 15.000 Total $68.000
• 100 shares of A Company common stock at $50 per share • 300 shares of B Company common stock at $80 per share • 200 shares of Company C preferred stock at $120 per share. • $15,000 Company D 10% bonds $ 5,000 24,000 24,000 15,000 Investments in Available-for-Sale Debt and Equity Securities Kent Company purchases the following securities on May 1, 2003 as an investment in available-forsale securities: Total $68,000 Intermediate Accounting 12 Investments
Investments in Available for-Sale debt and Equity securities Investment in Available-for-Sale Securities 68.000 Interest revenue 625 Cash 68.625 Continued
Investment in Available-for-Sale Securities 68,000 Interest Revenue 625 Cash 68,625 Continued Intermediate Accounting 12 Investments Investments in Available-for-Sale Debt and Equity Securities
Intermediate Accounting 12 Investments Investments in Available for-Sale debt and Equity securities Accrued interest on the d company bond from november 30, 2002 to may 31. 2003 May31,2003 Cash 750 Interest revenue 750 $15000X0.10 Continued X6/12
Accrued interest on the D Company bond from November 30, 2002 to May 31, 2003 May 31, 2003 Cash 750 Interest Revenue 750 Continued $15,000 x 0.10 x 6/12 Intermediate Accounting 12 Investments Investments in Available-for-Sale Debt and Equity Securities