December 1, 2016
1. When the value of a trading security goes up, what is theeffect on
Net Income
Other Comprehensive Income
Comprehensive Income
Assets
Retained earnings
Accumulated other comprehensive income
Ownersâ Equity
2. When the value of an available for sale security goes up,what is the effect on
Net Income
Other Comprehensive Income
Comprehensive Income
Assets
Retained earnings
Accumulated other comprehensive income
Ownersâ Equity
3. When the value of a HTM security goes up, what is the effecton
Net Income
Other Comprehensive Income
Comprehensive Income
Assets
Retained earnings
Accumulated other comprehensive income
Ownersâ Equity
4. When the value of an Equity Method security goes up, what isthe effect on
Net Income
Other Comprehensive Income
Comprehensive Income
Assets
Retained earnings
Accumulated other comprehensive income
Ownersâ Equity
5. Extra credit. Available for sale securities are reported atfair value. This means that changes in fair value are reported inother comprehensive income. Can you provide a scenario where thecompany purchased a bond classified as AFS and the market value ofthe bond has remained constant throughout, yet the company willneed to report other comprehensive income as a result of theinvestment? Hint: Refer to the two-word phrase that describes theaccounting method for HTM.
6. The two basic securities investments are stocks and bonds.For each of the following classifications, indicate whether theycan include stocks, bonds, or both:
Trading securities
AFS (for this there was a rule change: you will get the answerright under either rule)
HTM
Equity Method
7. What does AFS stand for?
8. What does HTM stand for?
9. Trading securities and AFS are carried at ___________________ .
10. HTM are carried at __________ ______________ .
Isnât accounting fun? Like most worthwhile things, itâs onlyfun if you invest a lot of time into it.