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Ch13 4es - Investment
Ch13 4es - Investment
Financial Accounting
IFRS 4th Edition
Weygandt ● Kimmel ● Kieso
Chapter 13
Investments
Chapter Outline
Learning Objectives
LO 1 Explain how to account for debt investments.
LO 2 Explain how to account for share investments.
LO 3 Indicate how debt and share investments are
reported in financial statements.
Learning Objective 1
Explain How to Account for Debt
Investments
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Cash 14,600
Loss on Sale of Debt Investments 400
Debt Investments (€30,000 × 15/30) 15,000
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Learning Objective 2
Explain How to Account for Share
Investments
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Between 20%
Less than 20% and 50% More Than 50%
Insignificant Significant Controlling
influence on influence on influence on
Investee investee investee
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Recording Dividends (3 of 4)
During the time Lee owns the shares, it makes entries for any cash
dividends received. If Lee receives a HK$20 per share dividend on
December 31, the entry is:
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Recording Revenue (3 of 5)
Assume that for 2020, Beck reports net income of ₤100,000. The
entry to record the transaction is:
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Recording Dividends (4 of 5)
Assume that for 2020, Beck pays a ₤40,000 cash dividend. The
entry to record the transaction is:
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Learning Objective 3
Indicate how debt and share
investments are reported in financial
statements
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Categories of Securities
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Trading Securities
• Companies hold trading securities with the
intention of selling them in a short period (generally
less than a month).
• Trading means frequent buying and selling.
• Companies report trading securities at fair value,
and report changes from cost as part of net income.
• Classified as current asset.
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Non-Trading Securities
• These securities can be classified as current assets
or as non-current assets, depending on the intent of
management.
• Procedure for determining fair value and the
unrealized gain or loss for these securities is the
same as for trading securities.
• Companies report securities at fair value, and
report changes from cost as a component of other
comprehensive income.
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Non-Trading Securities
Inagrao AG
Comprehensive Income Statement
For the Year Ended December 31, 2020
The closing entry to transfer the Unrealized Gain or Loss—Equity to Accumulated Other
Comprehensive Income is:
Dec. 31 Accumulated Other Comprehensive Income 9,537
(2020) Unrealized Gain or Loss—Equity 9,537
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Non-Trading Securities
Inagrao AG
Statement of Financial Position (partial)
December 31, 2020
Equity
Share capital—ordinary € 1,200,000
Retained Earnings 126,200
Accumulated other comprehensive loss (9,537)
Total Equity € 1,316,663
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Non-Trading Securities
Inagrao AG
Comprehensive Income Statement
For the Year Ended December 31, 2021
The closing entry to transfer the Unrealized Gain or Loss—Equity to Accumulated Other
Comprehensive Income is:
Dec. 31 Unrealized Gain or Loss—Equity 11,174
(2021) Accumulated Other Comprehensive Income 11,174
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Non-Trading Securities
Inagrao AG
Statement of Financial Position (partial)
December 31, 2020
Equity
Share capital—ordinary € 1,200,000
Retained Earnings 327,600
Accumulated other comprehensive income 1,637
Total Equity € 1,529,237
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Non-Trading Securities (1 of 2)
In the statement of financial position, a debit balance
in Unrealized Gain or Loss—Equity results in a(n):
a. increase to equity.
b. decrease to equity.
c. loss in the income statement.
d. loss in the retained earnings statement.
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Non-Trading Securities (2 of 2)
In the statement of financial position, a debit balance
in Unrealized Gain or Loss—Equity results in a(n):
a. increase to equity.
b. decrease to equity.
c. loss in the income statement.
d. loss in the retained earnings statement.
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Non-Trading Securities
Pace SA
Statement of Financial Position (partial)
Current assets
Short-term investments, at fair value € 147,000
Cash 21,000
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PACE SA
Statement of Financial Position
December 31, 2020
Assets
Intangible assets
Goodwill €270,000
Property, plant, and equipment
Land €200,000
Buildings €800,000
Less: Accumulated depreciation—buildings 200,000 600,000
Equipment 180,000
Less: Accumulated depreciation—equipment 54,000 126,000
Total property, plant, and equipment 926,000
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PACE SA
Statement of Financial Position
December 31, 2020
Assets
Investments
Investments in held-for-collection debt 20,000
securities, at amortized cost
Investment in shares of less than 20% owned 30,000
companies, at fair value
Investment in share of 20—50% owned 150,000 200,000
company, at equity
Current assets
Prepaid insurance 23,000
Inventory, at FIFO cost 43,000
Accounts receivable 84,000
Less: Allowance for doubtful accounts 4,000 80,000
Short-term investments, at fair value 147,000
Cash 21,000 314,000
Total assets €1,710,000
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PACE SA
Statement of Financial Position
December 31, 2020
Equity and Liabilities
Equity
Share capital—ordinary, €10 par value, 200,000 shares €800,000
authorized, 80,000 shares issued and outstanding
Share premium—ordinary 100,000
Retained earnings (Note 1) 255,000
Accumulated other comprehensive income 10,000 €1,165,000
Non-current liabilities
Bonds payable, 10%, due 2024 290,000
Current liabilities
Accounts payable 185,000
Income taxes payable 60,000
Interest payable 10,000 255,000
Total equity and liabilities €1,710,000
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Learning Objective 4
Describe the form and content of
consolidated financial statements as
well as how to prepare them
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Assets
Goodwill £ 5,000
Plant and equipment (net) 480,000
Current assets 115,000
Total assets £600,000
Equity and Liabilities
Equity
Share capital—ordinary £300,000
Retained earnings 175,000 £475,000
Current Liabilities 125,000
Total equity and liabilities £600,000
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Learning Objective 5
Compare the accounting for
investments under IFRS and U.S. GAAP
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Copyright
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