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ACCT II Exam 1

QuestionAnswer
Premium on bonds payable is a ? liability account adjunct
The specific provisions of a bond issue are described in a document called a bond indenture
In the statement of cash flows, inflows and outflows of cash from buying and selling trading securities typically are considered operating activities
Trading securities are most commonly reported on the financial statements of banks
How are AFS debt securities reported on the balance sheet Fair value (market price)
Trading securities are properly classified in the balance sheet as current assets
Bonds payable should be reported as a long-term liability in the balance sheet of the issuing corporation at the Face amount price less any unamortized discount or plus any unamortized premium
How do stated and market interest rates determine whether bonds issue at a discount or premium Market > Stated = Discount
Which type of investment security does not report fair value Held to maturity
Under AFS securities, gains ? and losses ? increase and decrease
Debt investments to be held for an unspecified period of time are reported at Fair value
Investments in debt securities that don't fit the definitions of the other reporting categories are classified as AFS
How do you determine accrued interest at year-end when interest payment dates don't fall on 12/31 Count the months from the last interest payment date to 12/31
Most corporate bonds are Debenture bonds
For recognizing debt investment interest we use the ? method effective interest
When an investor accounts for an investment in common stock at fair value through NI, cash dividends are classified as Dividend income
When a debt security is appropriately carried and reported as AFS< a gain should be reported in the income statement Only when the security is sold
The fair value method for investments in equity securities generally applies when the percentage ownership in another company is less than 20%
How do unrealized gains/losses on AFS debt securities affect retained earnings No effect - they go to OCI/AOCI not NI/Retained Earnings
Bonds usually sell at their Present value
Created by: user-2032302
 

 



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