《基础会计(英文版)(第二版)Chapter-15-Corporation-as-an-Investo.ppt》由会员分享，可在线阅读，更多相关《基础会计(英文版)(第二版)Chapter-15-Corporation-as-an-Investo.ppt（20页珍藏版）》请在得力文库 - 分享文档赚钱的网站上搜索。
1、Chapter 15Corporation as an Investor:Investments inCorporate SecuritiesNature of InvestmentsBonds and notes(Debt securities)Common and preferred stock(Equity securities)Investments can be accounted for in a variety of ways,depending on the nature of the investment relationship.Accounting for Investm
2、ents in Bonds Assume that on August 1 Guangli Co.Ltd purchased 10 000 yuan,9%bonds of Baiyun Co.which pays interest on June 1 and December 1.Guangli Co.Ltd bought the bonds on August 1,at the price of 98,plus a brokerage commission of 50 yuan and two months accrued interest of 150 yuan.Lets look at
3、the journal entry made by Guangli Co.Investment in Bonds 9 850Bond Interest Receivable 150 Cash 10 000Accounting for Investments in BondsOn December 1,the semiannual interest payment date,Guangli Co.Ltd will record the interest revenue as follows:Cash 450 Bonds Interest Receivable 150 Bonds Interest
4、 Revenue 300 Accounting for Investments in BondsnWhen classified as current assets,no amortization of bond premium or discountnWhen classified as long-term assets,need to amortize the premium or discount.nAmortization of a discount will increase the amount of interest revenue recognized by the inves
5、tor;namortization of a premium will reduce the amount of interest revenue recognized.Accounting for Investments in BondsAccounting for Investments in BondsWhen bonds are sold by the investor,any gain or loss caused by the sale should be recognized and recorded.Cash 9 440Loss on Sale of Bonds 250 Inv
6、estments in Bonds 9 600 Bond interest Revenue 90 Accounting for Investments in StocksnPurposes of investmentnInvestment for income nInvestments for purpose of influence or control Investments for Income-the Cost MethodOn September 15,205,Guangli Co.Ltd purchased 10 000 shares of common stock of Shen
7、fa Co.,which is selling for 16.25 yuan per share plus a brokers commission of 500 yuan.Lets look at the journal entry to record the acquisition by using the cost method.Investment in Stock 163 000 Cash 163 000Investments for Income-the Cost MethodOn October 1,Shenfa Co.declares a 1 yuan per share ca
8、sh dividend to stockholders of record on October 20,payable October 30.Oct.1 Dividends Receivable 10 000 Dividend Income 10 000 Oct.30 Cash 10 000 Dividends Receivable 10 000 nReceipt of stock dividendsnMemo entry is needed.nAverage cost of investments decreases.Investments for Income-the Cost Metho
9、dNow,lets look at the entry to record the sale of investment.On May 12,206,Guangli Co.Ltd sells 3000 shares of Shenfa stock at 19.20 yuan per share less brokerage commission of 200 yuan.Investments for Income-the Cost MethodCash(19.20 3 000 shares 200)57 400 Investment in Stock(12.54 3000 shares)37
10、620 Gain on Sale of Stock 19 780Valuation of a Portfolio of Marketable SecuritiesnThe Rule of Lower-of-Cost-or-Market(LCM rule)na portfolio of marketable securities should be shown in the investors balance sheet at the lower of the portfolios total cost or current market value.Valuation of a Portfol
11、io of Marketable SecuritiesOn December 31,205,Guangli Co.Ltd had the following portfolio of equity securities with changes of market prices compared with their costs:Cost Market ValueCommon stock of Company A 100 000 106 000Common stock of Company B 60 000 52 000Preferred stock of Company C 200 000
12、182 000Other marketable securities 25 000 25 000 Totals 385 000 365 000 Valuation of a Portfolio of Marketable SecuritiesThe entry to record the unrealized loss of 20 000 yuan is as follows:Dec.31 Unrealized Loss on Marketable Securities 20 000 Valuation Allowance for Marketable Securities 20 000 In
13、vestments for Purposes of Influence or ControlnOwnership of 20%or more but less than 50%of the investees common stock is viewed as giving the investor significant influence over the investees policies and operations.nThe equity method is used.Investments for Purposes of Influence or ControlLets illu
14、strate the equity method with Guanglis investment in another business Guangde Company.Early 202,Guangli Co Ltd purchased 30%of the common stock of Guangde Company for 2 000 000 yuan,which corresponded to the underlying book value.During the following year,Guangde Company earned net income of 1 200 0
15、00 yuan and paid dividends of 300 000 yuan.Investments for Purposes of Influence or ControlInvestment in Guangde Co.2 000 000 Cash 2 000 000 Investment in Guangde Co.360 000 Investment Income 360 000 Cash 90 000 Investment in Guangde Company 90 000 Parent and Subsidiary Corporations nWhen an investo
16、r corporation owns more than 50%of the voting stock of the investee corporation,it becomes the parent company and the investee corporation is the subsidiary.nConsolidated financial statements should be prepared.Guangli Co.Ltd and SubsidiaryConsolidated Balance SheetJanuary 1,202ASSETSCurrent assets:
17、Cash 1 050 000 Accounts receivable 1 200 000 Inventories 2 050 000 Total current assets 4 300 000Fixed assets:3 900 000Total assets 8 200 000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable 1 550 000Stockholders equity:Capital stock 4 000 000 Retained earnings 2 650 000 Total stockholders equity 6 650 000Total liabilities&stockholders equity 8 200 000
黑公网安备:91230400333293403D