ch13-2010财务会计,英文版。原书第五版~PPT~!

财务会计,英文版。原书第五版~PPT~!

CHAPTER 13

INVESTMENTS 投资

财务会计,英文版。原书第五版~PPT~!

Study Objectives Discuss why corporations invest in debt and stock securities Explain the accounting for debt investments Explain the accounting for stock investments Distinguish between short-term and long-term investments

财务会计,英文版。原书第五版~PPT~!

TEMPORARY INVESTMENTS 短期投资 AND THE OPERATING CYCLE At the end of their operating cycles, many companies may have temporarily idle cash on hand pending the start of the next operating cycle Until the cash is needed in operations, these companies may invest the excess funds to earn interest and pidends The relationship of temporary investments to the operating cycle is depicted below

财务会计,英文版。原书第五版~PPT~!

invest

Cash

sell

Temporary Investment (capital Market )

Accounts receivable

inventory

财务会计,英文版。原书第五版~PPT~!

WHY CORPORATIONS INVESTReason Example

To house excess cash until neededTo generate earnings To meet strategic goals

Government bondsBanking bonds stocks

财务会计,英文版。原书第五版~PPT~!

TEMPORARY AND LONG-TERM INVESTMENTS Temporary investments 短期投资 are securities, held by a company, that are - readily marketable and - intended to be converted into cash within the next year or operating cycle, whichever is longer Investments that do not meet both criteria are classified as long-term investments 长期投资

财务会计,英文版。原书第五版~PPT~!

ACCOUNTING FOR DEBT INVESTMENTS ENTRIES AT ACQUISITION

Debt investments 债券投资 are investments in government and corporation bonds. In accounting for debt investments, entries are required to record

- Acquisition - interest revenue, and - sale.

财务会计,英文版。原书第五版~PPT~!

ACCOUNTING FOR DEBT INVESTMENTS ENTRIES AT ACQUISITION At acquisition – the cost principle applies, and cost includes all expenditures necessary to acquire these investments Kuhl Corporation acquires 50 Doan Inc. 12%, 10-year, $1,000 bonds on January 1, 2002, for $54,000, including brokerage fees of $1,000. The entry to record the investment is:

财务会计,英文版。原书第五版~PPT~!

Date Accounts Jan 1 Debt investments Cash

DR 54,000

CR

54,000

The bonds pay $3,000 interest on July 1 and January 1 ($50,000 X 12% X ½). The July 1 entry is:

财务会计,英文版。原书第五版~PPT~!

Date Accounts July 1 Cash Interest revenue

DR 3,000

CR

3,000

It is necessary to accrue $3,000 interest earned since July 1 at year-end. The December 31 entry is:

财务会计,英文版。原书第五版~PPT~!

Date Accounts Dec 31 Interest receivable Interest revenue

DR 3,000

CR

3,000

Date Accounts Jan 1 Cash Interest receivable

DR 3,000

CR

3,000

财务会计,英文版。原书第五版~PPT~!

ACCOUNTING FOR DEBT INVESTMENTS ENTRIES FOR SALE OF BONDS Any difference between the net proceeds (sales price less brokerage fees) from the sale of bonds and the cost of the bonds is recorded as a gain or loss. Kuhl Corporation receives net proceeds of $58,000 on the sale of the Doan Inc. bonds on January 1, 2003, after receiving the interest due. Since the securities cost $54,000, a gain of $4,000 has been realized. The entry to record the sale is:

财务会计,英文版。原书第五版~PPT~!

Date Accounts

DR

CR

Jan 1

CashDebt investment Gain on the sale of debt investment

58,00054,000 4,000

财务会计,英文版。原书第五版~PPT~!

ACCOUNTING GUIDELINES FOR STOCK INVESTMENTS

股票投资 Stock investments are investments in the capital stock of corporations. Under the different situation, the accounting treatment will be different.

财务会计,英文版。原书第五版~PPT~!

Investor’s ownership interest in investee’s common stock

Presumed influence on investee

Accounting guidelines

Less than 20%

Insignificant

Cost method 成本法Equity method 权益法 Consolidated financial statement 合并财务报表

Between 20% and Significant 50% More than 50% Controlling

财务会计,英文版。原书第五版~PPT~!

ACCOUNTING FOR STOCK INVESTMENTS HOLDINGS LESS THAN 20%

In accounting for stock investments of less than 20%, the cost method is used. The investment is recorded at cost revenue is recognized only when cash pidends are received.