财务会计英文版课后习题答案Ch12Word文档格式.docx

财务会计英文版课后习题答案Ch12Word文档格式.docx

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becausetheybelievethatpurchased

investmentsprovideagoodreturnonmoneyinvestedorbecausetheywanttogaininfluenceorcontroloverinvesteecompanies.

2.Theriskandreturntrade-offofinvestmentsisthatinvestorsmustusuallydecidewhethertheywantapotentiallyhigherreturnwithmoreriskoralowerreturnwithlessrisk.Mostinvestmentsfallsomewherealongarisk-returncontinuum.Investmentsthatprovidehighreturnsbuthavelowriskaredesirable,butrare.

3.TheFASBhasdefinedfourdifferentclassificationsfordebtandequitysecurities:

tradingsecurities,available-for-salesecurities,held-to-maturitysecurities,andequitymethodsecurities.

4.Asecuritywillbeclassifiedastradingiftheinvestorismakingtheinvestmentwiththeintentofsellingthesecurityshouldtheneedforcasharise,ortorealizeshort-termprofitsshouldthepriceofthesecurityincrease.

5.Asecuritywillbeclassifiedasheld-to-maturityiftheinvestorintendstoholdthesecurityuntilitmatures.Thiscriterionmeansthatonlydebtsecuritiescanbeclassifiedasheld-to-maturity,asequitysecuritiestypicallydonotmature.Ifadebtsecurityisclassifiedasheld-to-maturity,anypremiumordiscountassociatedwiththesecuritymustbeamortizedoverthelifeofthedebtsecurity.

6.Tobeclassifiedasanequitymethodsecurity,aninvestormusttypicallyownbetween20and50%oftheoutstandingcommonstockoftheinvestee.Ownershipofbetween20and50%generallyindicatestheabilityoftheinvestortosignificantlyinfluencethe

operationsanddecisionsoftheinvestee.

7.Whenaninvestorpurchasesdebtandequitysecurities,twotypesofreturnsmayberealized.Thefirsttypeofreturnisthereceiptofinterest（inthecaseofdebt）ordividends（inthecaseofequity）.Thesecondtypeofreturnisfromanincreaseinthepriceofthesecurity.Torealizethistypeofreturn,theinvestormustsellthesecurity.

8.Whenasecurityissold,thesellermusthaveseveralpiecesofinformationtoproperlyaccountforthetransaction.Thesellermustknowthesellingpriceaswellasthehistoricalcostofthesecurity.Thedifference

betweenthesetwoamountsresultsinarealizedgainorlossonthesale.

9.Thedifferencebetweenarealizedgainorlossandanunrealizedgainorlossrelatestotheaccountingconceptofarm’s-lengthtransactions.Theterm“realized”indicatesthatanarm’s-lengthtransactionhastakenplaceandasecurityhasbeensold.Arealizedgainindicatesthatthesecuritywassoldformorethanitshistoricalcost,whilearealizedlossmeansthatthesecuritywassoldforlessthanitsoriginalpurchaseprice.Anunrealizedgainmeansthatthepriceofthesecuritybeingheldhasincreasedaboveitshistoricalcost,butthesecurityhasnotbeensold.Ifthesecurityisstillbeingheldandthepricefallsbelowitshistoricalcost,anunrealizedlosshasoccurred.

10.Theaccount“MarketAdjustment”isusedtovaluebothtradingandavailable-for-salesecuritiesattheirmarketvalue.Tradingandavailable-for-salesecuritiesareinitially

recordedattheirhistoricalcost,andastheirvaluechanges,thehistoricalcostremainsthesameonthebooks.Toreflectmarketvaluesonthebooks,themarketadjustmentaccountisusedtorecordbothincreasesanddecreasesinvalue.Aseparatemarketadjustmentaccountisusedforbothtradingandavailable-for-salesecurities.

11.Changesinthevalueoftradingsecurities,bothincreasesanddecreases,arerecordedonthebooksoftheinvestor.Priorto1994,onlydeclinesbelowhistoricalcostwere

recordedonthebooks.In1994,however,theruleswerechangedtoallowcompaniestorecordbothincreasesanddecreasesinvalue.Attheendofeachaccountingperiod,themarketvalueoftheportfoliooftradingsecuritiesiscomparedtoitshistoricalcost,andthedifferenceisrecordedinthemarketadjustmentaccount.Theoffsettingcredit（inthecaseofincreasesinvalue）ordebit（inthecaseofdecreasesinvalue）isrecordedinanincomestatementaccountasanunrealizedgainorloss.

12.Accountingforchangesinthevalueofavailable-for-salesecuritiesissimilartotheproceduresappliedwhenaccountingfortradingsecuritieswithoneimportantdifference.Insteadofrecordinganyunrealizedincreasesordecreasesinvalueonthe

incomestatement,unrealizedincreases

anddecreasesinvaluearerecordedinastockholders’equityaccount,Unrealized

Increase/DecreaseinValueofAvailable-for-SaleSecurities—Equity.Thus,thejournalentrytorecordunrealizedchangesinvaluealwayscontainsthestockholders’equityaccountandthemarketadjustment—available-for-salesecuritiesaccount.

13.Themarketadjustmentaccountcanbefurtheradjusted;

however,theadjustmentaccountshouldalwaysreportthetotalnetchangeinthevalueofthesecurity.Forexample,ifasecuritythatcost$200roseinvalueto$300duringthefirstperiodandthento$350duringthesecondperiod,themarketadjustmentaccountwouldshowabalanceof$150attheendofthesecondperiod.

14.Premiumsanddiscountsonavailable-for-salesecuritiesarenotamortizedbecauseitisassumedthattradingandavailable-for-salesecuritieswillnotbeheldlongenoughtowarranttheneedtoamortizeapremiumordiscount.

15.Changesinthevalueofheld-to-maturityandequitymethodsecuritiesarenotaccountedforonthebooksoftheinvestor.Forheld-to-maturitysecurities,theinvestorintendstoholdthedebtsecurityuntilitmatures,andasaresult,changesinvaluewillnotaffecttheeventualmaturityvalueofthesecurity.Forequitymethodsecurities,theinvestorisholdingthesecurityforthepurposeofbeingabletoinfluencetheoperatingdecisionsoftheinvesteeonalong-termbasis.Thus,temporarychangesinvalueofequitymethodsecuritiesareignoredforaccountingpurposes.

16.Theonlydifferencebetweentheaccountingfortradingsecuritiesandavailable-for-salesecuritiesliesinunrealizedchangesinvalueofthosesecurities.Fortradingsecurities,thechangesinvaluearerecordedontheincomestatement.Foravailable-for-salesecurities,theunrealizedchangesinvaluearerecordedinastockholders’equityaccount.

17.*Whenbuyingaheld-to-maturitysecurity,aninvestorpurchasestherighttoreceivetwodifferenttypesoffuturecashreceipts.First,theinvestorreceivesperiodicinterestpaymentsoverthelifeofthesecurity;

second,theinvestorreceivesthefaceamount（principal）ofthesecurityatmaturity.

18.*Acompanywouldusuallybewillingtopaymorethanthefaceamount（apremium）foraheld-to-maturitysecuritywhentheinterestrateonthesecurityishigherthanthemarketrateofinterestforsimilarinvestments.Thepayingofahigherpricereducesthestatedrateofinteresttoapointwhereitapproximatesthemarketrateofinterest.

19.*Theamortizationofadiscountincreasestheamountearnedonaheld-to-maturitysecuritybecauseatmaturityinvestorsreceivethefacevalue,whichishigherthantheamountoriginallypaid.Theseincreasedproceedsmustberecognizedoverthelifeofthesecuritythroughamortization.Theamortizationofadiscountincreasesinterestfromastatedratetoahighereffectiverate.

20.*Aninvestorpurchasingheld-to-maturitysecurities（typicallybonds）betweeninterestdatesmustpayforaccruedinterestbecauseatthenextinterestpaymentdateafull

period’sinterestwillbereceived,eventhoughthesecuritieshavebeenheldforonlyaportionoftheperiod.Becausethesecuritiesaresoldinrelativelysmalldenominationsandareusuallyownedbynumerousindividuals,itisalmostimpossibleforacompanytoknowwhoboughthowmanybondsonwhichdates.Therefore,withmanyheld-to-maturitysecurities,whoeverownsthesecuritiesontheinterestpaymentdatereceivesthefullperiod’sinterest.

*Relatestoexpandedmaterial.

21.*Theeffective-interestamortizationmethodistheoreticallysuperiortothestraight-lineamortizationmethodbecauseittakesintoconsiderationthetimevalueofmoney.Withtheeffective-interestmethod,theamountofinterestrecognizedistheeffectiveinterestratetimestheamountofmoneyactually

beingborrowedatanyperiodoftime.Thestraight-linemethodisonlyanapproximationofthetruerateofinterest.

22.*Thekeycriterionforusingtheequitymethodistheabilityoftheinvestortoinfluencetheoperationsordecisionsoftheinvestee.

23.*Theaccountingprofessionhasprovidedguidelinestodetermineiftheabilityto

significantlyinfluencetheoperatingdecisionsofaninvesteeexists.Theprimaryguidelineisdegreeofownership.Iftheinvestorownsbetween20and50%ofacorporation’soutstandingcommonstock,itisassumedthattheinvestorisabletosignificantlyinfluencetheinvestee.Thus,unlessevidenceexiststothecontrary,ownershipofbetween20and50%wouldrequiretheuseoftheequitymethod.

24.*Whenaninvestorpurchasesatradingsecurity,revenueisrecognizedwheninterestor

dividendsarereceived.Againorloss（unrealized）isrecordedwhenthesecurity’spricechangesinvalue.Foraninvestmentaccountedforundertheequitymethod,revenueisrecognizedwhentheinvesteereportsincomefortheperiod.Thisrecognitionservestoincreasetheinvestmentaccount.Theinvestmentaccountisdec