Accounting Principles Investments参考.pptx

16InvestmentsLearning ObjectivesExplain how to account for debt investments.1Explain how to account for stock investments.2Discuss how debt and stock investments are reported in financial statements.3Explain how to account for debt investments.LEARNINGOBJECTIVE1Corporations purchase investments in debt or stock securities generally for one of three reasons.Corporation may have excess cash.Generate earnings from investment income.For strategic reasons.Illustration 16-1Temporary investments and the operating cycleLO 1Why Corporations InvestQuestionPension funds and banks regularly invest in debt and stock securities to: house excess cash until needed. generate earnings. meet strategic goals. avoid a takeover by disgruntled investors.LO 1Accounting for Debt InvestmentsInvestments in government and corporation bonds. Entries are made to record the acquisition,the interest revenue, and the sale.RECORDING ACQUISITION OF BONDSCost includes all expenditures necessary to acquire these investments, such as the price paid plus brokerage fees (commissions), if any.LO 1Accounting for Debt InvestmentsRECORDING BOND INTERESTCalculate and record interest revenue based upon the carrying value of the bond times the interest rate times the portion of the year the bond is outstanding.LO 1Accounting for Debt InvestmentsRECORDING SALE OF BONDSCredit the investment account for the cost of the bonds.Record as a gain or loss any difference between the net proceeds from the sale (sales price less brokerage fees) and the cost of the bonds.LO 1Accounting for Debt InvestmentsIllustration: Kuhl Corporation acquires 50 Doan Inc. 8%, 10-year, $1,000 bonds on January 1, 2017, for $50,000. The entry to record the investment is:Jan. 1Debt Investments 50,000 Cash 50,000LO 1Accounting for Debt InvestmentsKuhl Corporation acquires 50 Doan Inc. 8%, 10-year, $1,000 bonds on January 1, 2017, for $50,000. The bonds pay interest annually on January 1. If Kuhl Corporation’s fiscal year ends on Decem