基础会计(英文版)(第二版)Chapter15CorporationasanInvestorInvestmentsinCorporateSecurities

,单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,Chapter 15,Corporation as an Investor:Investments in,Corporate Securities,Nature of Investments,Bonds 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 Investments 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 the journal entry made by Guangli Co.,Investment in Bonds 9 850,Bond Interest Receivable 150,Cash 10 000,Accounting for Investments in Bonds,On 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 Revenue 300,Accounting for Investments in Bonds,When classified as current assets,no amortization of bond premium or discount,When classified as long-term assets,need to amortize the premium or discount.,Amortization of a discount will increase the amount of interest revenue recognized by the investor;,amortization of a premium will reduce the amount of interest revenue recognized.,Accounting for Investments in Bonds,Accounting for Investments in Bonds,When bonds are sold by the investor,any gain or loss caused by the sale should be recognized and recorded.,Cash 9 440,Loss on Sale of Bonds 250,Investments in Bonds 9 600,Bond interest Revenue 90,Accounting for Investments in Stocks,Purposes of investment,Investment for income,Investments for purpose of influence or control,Investments for Income-the Cost Method,On September 15,205,Guangli Co.Ltd purchased 10 000 shares of common stock of Shenfa 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 163 000,Investments for Income-the Cost Method,On October 1,Shenfa Co.declares a 1 yuan per share cash 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,Receipt of stock dividends,Memo entry is needed.,Average cost of investments decreases.,Investments for Income-the Cost Method,Now,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 Method,Cash(19.20,3 000 shares,200)57 400,Investment in Stock(12.54,3000 shares)37 620,Gain on Sale of Stock 19 780,Valuation of a Portfolio of Marketable Securities,The Rule of Lower-of-Cost-or-Market(LCM rule),a 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 Portfolio of Marketable Securities,On December 31,205,Guangli Co.Ltd had the following portfolio of equity securities with changes of market prices compared with their costs:,Cost Market Value,Common stock of Company A 100 000 106 000,Common stock of Company B 60 000 52 000,Preferred stock of Company C 200 000 182 000,Other marketable securities,25 000,25 000,Totals,385 000,365 000,Valuation of a Portfolio of Marketable Securities,The 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,Investments for Purposes of Influence or Control,Ownership 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.,The equity method is used.,Investments for Purposes of Influence or Control,Lets illustrate 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 1 200 000 yuan and paid dividends of 300 000 yuan.,Investments for Purposes of Influence or Control,Investment 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,When an investor 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.,Consolidated financial statements should be prepared.,Guangli Co.Ltd and Subsidiary,Consolidated Balance Sheet,January 1,202,ASSETS,Current assets:,Cash,1 050 000,Accounts receivable,1 200 000,Inventories,2 050 000,Total current assets,4 300 000,Fixed ass