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Chapter 10: Q.10RQ (page 566)

Question: Where on the financial statements is an unrealized holding gain or loss on trading debt investments reported?

Short Answer

Expert verified

Answer

Unrealized holding gains or losses arereported on the income statement.

Step by step solution

01

Definition of Operating Income

Operating income is a metric that reflects the portion of the revenue generated from the profit that is converted into income. It isreported in the income statement of the company.

02

Reporting Unrealized Holding Gains or Loss

The unrealized holding gains or losses generated on trading debt investment are reported as other revenue and expenses separately from the income statement's operating income and expenses.

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Most popular questions from this chapter

Question: S10-5 Accounting for debt investments

On February 1, 2018, Bell Co. decides to invest excess cash of \(16,800 by purchasing a Grant, Inc. bond at face value. At year-end, December 31, 2018, the fair value of the Grant bond was \)19,600. The investment is categorized as a trading debt investment.

Requirements

1. Journalize the transactions for Bell’s investment in Grant, Inc. for 2018.

Accounting for equity investments

Strategic Investments completed the following investment transactions during 2018:

Jan. 14 Purchased 800 shares of Phyflexon stock, paying \(50 per share. The investment represents 4% ownership in Phyflexon’s voting stock. Strategic does not have significant influence over Phyflexon. Strategic intends to hold the investment for the indefinite future.

Aug. 22 Received a cash dividend of \)0.24 per share on the Phyflexon stock.

Dec. 31 Adjusted the investment to its current market value of \(45 per share.

31 Phyflexon reported net income of \)330,000 for the year ended 2018.

Requirements

Prepare a partial income statement for Strategic Investments for year ended December 31, 2018.

What is a debt security?

What is equity security?

Accounting for equity investments

Money Man Investments completed the following transactions during 2018:

Jan. 14 Purchased 400 shares of Technomite stock, paying \(56 per share. The investment represents 25% ownership in Technomite’s voting stock and Money Man has significant influence over Technomite. Money Man intends to hold the investment for the indefinite future.

Aug. 22 Received a cash dividend of \)0.27 per share on the Technomite stock.

Dec. 31 Technomite’s current market value is \(51 per share.

31 Technomite reported net income of \)180,000 for the year ended 2018.

Requirements

Classify and prepare partial financial statements for Money Man’s 25% Technomite investment for the year ended December 31, 2018.
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