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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

Owners’ 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

Owners’ 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

Owners’ 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

Owners’ 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 __________ ______________ .

Isn’t accounting fun? Like most worthwhile things, it’s onlyfun if you invest a lot of time into it.

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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Related questions

Financial statements for E-Perform Inc follow:

E-Perform, Inc

Balance Sheet

December 31

2009 2008
Assets
Cash $97,800 $48,400
Accounts Receivable 75,800 43,000
Inventories 122,500 92,850
Prepaid Expenses 38,400 26,000
Available-for-Sale Securities 128,000 114,000
Property, plant and equipment 270,000 242,500
Accumulated Depreciation (50,000) (52,000)
Total Assets $682,500 $514,750
Liabilities and Shareholders' Equity
Accounts Payable $93,000 $77,300
Accrued Expenses Payable 11,500 7,000
Notes Payable 110,000 150,000
Common Shares 220,000 175,000
Retained Earnings 234,000 105,450
Accumulated other comprehensive income 14,000 0
Total liabilities and shareholders' equity $682,500 $514,750

Statement of Earnings:

Sales $492,780
Cost of Goods Sold 185,460
Gross Profit 307,320
Operating Expenses
Other operating expenses $62,410
Depreciation expense 46,500 108,910
Earnings from operations 198,410
Other expenses
Interest expense $4,730
Loss on sale of equipment 7,500 12,230
Earnings before income tax 186,180
Income tax expense 45,000
Net Earnings $141,180

Additional Information:

1. The available-for-sale securities were revalued to their fair value of $128,000 at the end of 2009.

2. New equipment costing $85,000 was purchased for $25,000 cash and a $60,000 note payable

3. Old equipment having an original cost of $57,500 was sold for $1,500

4. Accounts payable relate only to merchandise creditors

5. Notes payable were repaid during the year

**Instructions: Prepare the cash flow statement using the direct method.

Question 25

Blossom Company received the following selected information fromits pension plan trustee concerning the operation of the company’sdefined benefit pension plan for the year ended December 31,2017.

January 1, 2017

December 31, 2017

Projected benefit obligation

$1,488,000

$1,514,000

Market-related and fair value of plan assets

809,000

1,135,900

Accumulated benefit obligation

1,600,000

1,718,800

Accumulated OCI (G/L)—Net gain

0

(198,800

)


The service cost component of pension expense for employee servicesrendered in the current year amounted to $76,000 and theamortization of prior service cost was $118,800. The company’sactual funding (contributions) of the plan in 2017 amounted to$246,000. The expected return on plan assets and the actual ratewere both 10%; the interest/discount (settlement) rate was 10%.Accumulated other comprehensive income (PSC) had a balance of$1,188,000 on January 1, 2017. Assume no benefits paid in 2017.

Determine the amounts of the components of pension expense thatshould be recognized by the company in 2017. (Enteramounts that reduce pension expense with either a negative signpreceding the number e.g. -45 or parenthesis e.g.(45).)

Components of Pension Expense

Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost

$

Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost

Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost

Actual Return on Plan AssetsAmortization of Prior ServiceCostBenefits PaidContributions to PlanExpected Return on PlanAssetsInterest on Projected Benefit ObligationService Cost

SHOW LIST OF ACCOUNTS

Prepare the journal entry to record pension expense and theemployer’s contribution to the pension plan in 2017.(Credit account titles are automatically indented whenamount is entered. Do not indent manually. If no entry is required,select "No Entry" for the account titles and enter 0 for theamounts.)

Account Titles and Explanation

Debit

Credit

(To record pension expense and employer’s contribution)

SHOW LIST OF ACCOUNTS

Indicate the pension-related amounts that would be reported onthe income statement and the balance sheet for Blossom Company forthe year 2017.

Blossom Company
Income Statement (Partial)

December 31, 2017For the Year Ended December 31, 2017For theQuarter Ended December 31, 2017

DividendsExpensesNet Income / (Loss)Retained Earnings – January1, 2017Retained Earnings – December 31, 2017RevenuesTotalExpensesTotal Revenues

Amortization of PSC InterestExpense PensionExpense RentExpense Service Cost

$

Blossom Company
Comprehensive Income Statement

December 31, 2017For the Year Ended December 31, 2017For theQuarter Ended December 31, 2017

DividendsExpensesNet Income / (Loss)Retained Earnings – January1, 2017Retained Earnings – December 31, 2017RevenuesTotalExpensesTotal Revenues

$XXXX

Amortization of PSCComprehensive IncomeInterest ExpenseLiabilityGainPension ExpenseRent ExpenseService CostOther ComprehensiveIncome (Loss)

Amortization of PSC ComprehensiveIncome InterestExpense LiabilityGain PensionExpense RentExpense ServiceCost Other Comprehensive Income (Loss)

$

Amortization of PSC ComprehensiveIncome InterestExpense LiabilityGain PensionExpense RentExpense ServiceCost Other Comprehensive Income (Loss)

Amortization of PSCComprehensive IncomeInterest ExpenseLiabilityGainPension ExpenseRent ExpenseService CostOther ComprehensiveIncome (Loss)

$XXXX

Blossom Company
Balance Sheet (Partial)

December 31, 2017For the Year Ended December 31, 2017For theQuarter Ended December 31, 2017

Current AssetsLiabilitiesIntangible AssetsProperty, Plant andEquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotalCurrent LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotalLiabilities and Stockholders' EquityTotal Property, Plant andEquipmentTotal Stockholders' Equity

Accounts PayableAccounts ReceivableAccumulatedDepreciationAccumulated Other Comprehensive Income (G/L)AccumulatedOther Comprehensive Loss (G/L)Accumulated Other ComprehensiveIncome (PSC)Accumulated Other Comprehensive Loss (PSC)CommonStockPension LiabilityRetained Earnings

$

Current AssetsCurrent LiabilitiesIntangible AssetsLong-termInvestmentsLong-term LiabilitiesProperty, Plant andEquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotalCurrent LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotalLiabilities and Stockholders' EquityTotal Long-termInvestmentsTotal Long-term LiabilitiesTotal Property, Plant andEquipmentTotal Stockholders' Equity

Accounts PayableAccounts ReceivableAccumulatedDepreciationAccumulated Other Comprehensive Income (G/L)AccumulatedOther Comprehensive Loss (G/L)Accumulated Other ComprehensiveIncome (PSC)Accumulated Other Comprehensive Loss (PSC)CommonStockPension LiabilityRetained Earnings

$

Accounts PayableAccounts ReceivableAccumulatedDepreciationAccumulated Other Comprehensive Income (G/L)AccumulatedOther Comprehensive Loss (G/L)Accumulated Other ComprehensiveIncome (PSC)Accumulated Other Comprehensive Loss (PSC)CommonStockPension LiabilityRetained Earnings


Dewey Corporation owns 30 percent of the common stock of Jimm Company, which it purchased at underlying book value on January 1, 20X5. Dewey reported a balance of $265,000 for its investment in Jimm Company on January 1, 20X5, and $298,000 at December 31, 20X5. During 20X5, Dewey and Jimm Company reported operating income of $347,000 and $77,000, respectively. Jimm received dividends from investments in marketable equity securities in the amount of $9,000 during 20X5. It also reported an increase of $16,000 in the market value of its portfolio of trading securities and an increase in the value of its portfolio of securities classified as available-for-sale. Jimm paid dividends of $27,000 in 20X5. Ignore income taxes in determining your solution.

Required:
a.

Assuming that Dewey uses the equity method in accounting for its investment in Jimm, compute the amount of income from Jimm recorded by Dewey in 20X5.

b.

Compute the amount reported by Jimm as other comprehensive income in 20X5.

c.

If all of Jimm’s other comprehensive income arose solely from its investment in available-for-sale securities purchased on March 10, 20X5, for $137,000, what was the market value of those securities at December 31, 20X5?

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