Question 23 When an investment in held-to-maturity security is transferred to an available-for-sale debt security, the...
Question 23
When an investment in held-to-maturity security is transferred to an available-for-sale debt security, the carrying value assigned to the available-for-sale debt security should be
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Its original cost |
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Its fair value at the date of the transfer |
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The higher of its original cost or its fair value at the date of the transfer. |
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The lower of its original cost or its fair value at the date of the transfer. |
Homework Answers
When securities that are classified as securities held-to-maturity are reclassified/ transferred into securities available for sale then such securities are to valued at the fair value as at the date of transfer.
Any gain or loss arising from such reclassification shall be recognized in the retained earnings as a component of shareholders equity.
Hence, in the given case, investment in held-to-maturity security is transferred to an available-for-sale debt security, the carrying value assigned to the available-for-sale debt security should be valued at its fair value at the date of the transfer.
Option B is correct.
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Question 23
When an investment in held-to-maturity security is transferred
to an available-for-sale debt security, the...
1. Under what circumstances is an investment is classified as Held to-maturity investment? Available-for-sale investment? 2....
1. Under what circumstances is an investment is classified as Held to-maturity investment? Available-for-sale investment? 2. In the current year, a company sells all its held-to-maturity investments because the market values had appreciated significantly. Can other investments now be classified as held to maturity? 3. An investor owns 40% of the shares of another company. Is this evidence enough to conclude that significant influence exists? 4. What are bonds and why are they used? 5. An available-for-sale investment is bought...
At December 31, 2017, the available-for-sale debt portfolio for Shamrock, Inc. is as follows. Security Cost...
At December 31, 2017, the available-for-sale debt portfolio for
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Security
Cost
Fair Value
Unrealized
Gain (Loss)
A
$21,875
$18,750
$(3,125
)
B
15,625
17,500
1,875
C
28,750
31,875
3,125
Total
$66,250
$68,125
1,875
Previous fair value adjustment balance—Dr.
500
Fair value adjustment—Dr.
$1,375
On January 20, 2018, Shamrock, Inc. sold security A for $18,875.
The sale proceeds are net of brokerage fees.
Show the balance sheet presentation of the investment-related
accounts at December 31, 2017
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In footnotes to its 2016 annual report, Bancfirst Corp. reported that held-to-maturity debt securities with an...
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At the beginning of 2019, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2019, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/19 Fair Value
A
$35,000
$44,000
B
53,000
50,000
Totals
$88,000
$94,000
During 2019, the following transactions occurred:
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May
3
Purchased C debt securities at their par value for
$50,000.
July
1
Sold all of the A securities for $44,000 plus interest of
$1,000.
Dec.
31
Received interest of $1,000 on the...
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On September 30, Franz Corporation notices a decline in value of its investment in held-to-maturity bonds...
On September 30, Franz Corporation notices a decline in value of its investment in held-to-maturity bonds that it believes to be other than temporary. On that date, the carrying value of the bonds is $38,500 and the fair value is $22,980, Required: Prepare the journal entry to record the impairment.
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Instructions On September 30, Franz Corporation notices a decline in value of its investment in held-to-maturity bonds. On that date, the carrying value of the bonds is $38,500 and the fair value is $22,980. Franz evaluation of this investment reveals that expected credit losses are $10,000 Required: Prepare the journal entry to record the impairment
Question #2 The following are the cost and fair value for a debt investment (Available to...
Question #2 The following are the cost and fair value for a debt investment (Available to December 31, 2020. of investment Available for Sale) on Fair Value Debt Investment - Available for Sale Cost 10,000,000 $ $ 9,000,000 Assume the company had Net Income of $620,000 at the end of 2020 Required: 1) Calculate the Unrealized Holding Gains and Losses. 2) Does the Unrealized Holding Gains and Losses affect the Income Statement or Balance Sheet 3) Prepare the journal entry...
At December 31, 2017, the available-for-sale debt portfolio for
Shamrock, Inc. is as follows.
Security
Cost
Fair Value
Unrealized
Gain (Loss)
A
$21,875
$18,750
$(3,125
)
B
15,625
17,500
1,875
C
28,750
31,875
3,125
Total
$66,250
$68,125
1,875
Previous fair value adjustment balance—Dr.
500
Fair value adjustment—Dr.
$1,375
On January 20, 2018, Shamrock, Inc. sold security A for $18,875.
The sale proceeds are net of brokerage fees.
Show the balance sheet presentation of the investment-related
accounts at December 31, 2017
Problem 2 (8 Points) Alamo Company has the following portfolio of available for sale debt investments: Amortized Cost Fair Value at 12/31/2019 Circus Company Bond $3,800,000 $3,100,000 Ajax Company Bond 2,400,000 2,600,000 Miracle Corporate Bond 5,900,000 6,000,000 Alamo is preparing its adjusting entries to value its portfolio at fair value for the year ending, 2019. At the end of the year, 2018, the total amortized cost of the portfolio was S11,900,000 and the total fair value was $10,500,000 leaving a...
At the beginning of 2019, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/19 Fair Value
A
$35,000
$44,000
B
53,000
50,000
Totals
$88,000
$94,000
During 2019, the following transactions occurred:
Transactions:
May
3
Purchased C debt securities at their par value for
$50,000.
July
1
Sold all of the A securities for $44,000 plus interest of
$1,000.
Dec.
31
Received interest of $1,000 on the...
E17-9 (L01) (Available-for-Sale Debt Securities Entries and Financial Statement Presentation) At December 31, 2017, the available-for-sale debt portfolio for Steffi Graf, Inc. is as follows. Security Cost Fair Value Unrealized Gain (Loss) $17,500 $15,000 152,500) 12,500 14,000 1,500 23,000 25,500 2,500 Total $53,000 $54,500 Previous fair value adjustment balance-Dr. Fair value adjustment--Dr. On January 20, 2018, Steffi Graf, Inc. sold security A for $15,100. The sale proceeds are not of brokerage fees Instructions (a) Prepare the adjusting entry at December...
On September 30, Franz Corporation notices a decline in value of its investment in held-to-maturity bonds that it believes to be other than temporary. On that date, the carrying value of the bonds is $38,500 and the fair value is $22,980, Required: Prepare the journal entry to record the impairment.
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Question #2 The following are the cost and fair value for a debt investment (Available to December 31, 2020. of investment Available for Sale) on Fair Value Debt Investment - Available for Sale Cost 10,000,000 $ $ 9,000,000 Assume the company had Net Income of $620,000 at the end of 2020 Required: 1) Calculate the Unrealized Holding Gains and Losses. 2) Does the Unrealized Holding Gains and Losses affect the Income Statement or Balance Sheet 3) Prepare the journal entry...
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