Exam 18: Investments

Trainor Inc., a public company, had the following transactions pertaining to debt investments held as trading investments: Jan 1 Purchased 60, 8%, $1,000 Terry Corp. bonds for $60,000. Interest is payable semi-annually on July 1 and January 1. On December 31 the bonds were trading at 101. Jul 1 Received semi-annual interest on Terry Corp. bonds. 1 Sold 30 Terry Corp. bonds for $32,000. Instructions a. Journalize the transactions. b. Prepare the required adjusting journal entries at December 31.

If a long-term bond investment is sold before maturity, an entry must be made to update any unrecorded interest and amortization of the discount or premium.

Investments in equity securities bought for the purposes of trading are reported at amortized cost.

An investee must record a fair value adjustment on trading investments.

Debt & Equity securities that are purchased for the purpose of selling in the short-term at a gain are referred to as

Use the following information for questions . At the end of Fanning Corporation's fiscal year, its portfolio of trading investments purchased during the year is as follows: -Fanning subsequently sells B common shares for $10,000. What entry is made to record the sale?

Companies purchase investments as a strategic investment with the intention of establishing and maintaining a long-term operating relationship with another company.

Which of the following is the most accurate?

Interest income is calculated by multiplying

Which of the following is a true statement regarding an investment in short-term debt instruments?

Companies reporting under IFRS will report all investments in debt instruments at amortized cost.

Interest revenue is reported under other revenues on the Income statement.

Sanajevah Corp. had the following transactions pertaining to its trading investments: Jan 1 Purchased 900 Punji Inc. shares for $9,450. Jun 1 Received cash dividends of $0.50 per share on Punji shares. Sep 15 Sold 400 Punji shares for $4,300. Dec 1 Received cash dividends of $0.50 per share on Punji shares. On December 31, the shares of Punji Inc. were trading for $10 each. Instructions a. Journalize the transactions. b. Indicate the income statement and/or comprehensive income effects of the transactions.

On January 1, 2014, Connors Landscaping Ltd. purchased at face value, a $1,000, 5%, bond that pays interest on January 1 and July 1. Connors has a calendar year end. -The entry for the receipt of interest on January 1, 2015, is

For companies reporting under IFRS, a short-term debt instrument which is held for trading will be valued at fair value on the balance sheet.

If the market rate changes after a public company purchases bonds to trade, the bonds carrying amount will not change.

Investments which are purchased principally for selling in the near future are called trading investments.

If a bond is sold at a price which is greater than the amortized cost of the bond

Under ASPE, only debt instruments will be reported at fair value.