LOMOARCPSD|27612663
ACC311 INVESTMENTS OVERVIEW AND ACCOUNTING
PRINCIPLES - LECTURE NOTES 2025-2026 UPDATED
STUDY SOLUTIONS
, lOMoARcPSD|27612663
Professor Jozsi Chapter 16: Investments ACC 3112
Lecture link:
https://www.screencast.com/users/jozsilectures/folders/Financial%20Accounting/media/9bfbe4e6-f30a-4209-
9d11e0989599b38d
Goals: company may make investments in the stock or bonds of another corporation typically to:
• return on otherwise idle funds (“passive” debt or stock securities of another company): ü return for stock
securities: dividends and appreciation in value; tax considerations ü return for debt securities: interest and
appreciation in value; tax considerations
• influence other company’s financial and operating policies and activities (equity method); indicators of significant
influence: acquire more than 20% of another company’s outstanding voting stock shares or membership on Board of
Directors of the investee or major supplier relationships; at any point, reflect all increases in ownership (share of
investee income less dividends declared)
• control another company because acquired more than 50% of outstanding voting stock of other corporation;
combined consolidated financial statements are presented since parent company and subsidiaries are viewed as
single economic entity. Separate income statements, balance sheets, and statements of cash flows are combined
each period on an item-by-item basis as a single set of consolidated financial statements. Intercompany transactions
and accounts are eliminated. Companies may seek diversification, acquisition of special assets or of unique
opportunities; vertical integration; cost savings (eliminate redundancies); quick entry into new domestic and foreign
markets; economies of scale (including negotiating power); more attractive financing opportunities given larger
capital base; diversification of business risk; business expansion; increasingly competitive environment. Companies
may retain legal identities and records as separate corporations or effect through dissolution (from survivor’s
standpoint only).
Summary view:
No influence: Significant Influence: Control:
§ Held-to-Maturity ▪ Equity method ▪ Consolidated Statements
§ Available-for-Sale
§ Trading Securities
ü trading: stocks or debt - actively traded for potential profit ü held to maturity: debt
with intent to keep until maturity
ü available for sale – not actively traded stock or bond investment; held for investment
returns; could sell but do not intend to sell in short term or keep until maturity (for
debt investment)
Events:
a) b uy : Trading, AFS, HTM, Investment (dr) " purchase price includes broker fees since necessary
Cash (cr)
b) earn return (revenue when interest earned and dividends declared by investor)
Downloaded by Brian kiarie ()
ACC311 INVESTMENTS OVERVIEW AND ACCOUNTING
PRINCIPLES - LECTURE NOTES 2025-2026 UPDATED
STUDY SOLUTIONS
, lOMoARcPSD|27612663
Professor Jozsi Chapter 16: Investments ACC 3112
Lecture link:
https://www.screencast.com/users/jozsilectures/folders/Financial%20Accounting/media/9bfbe4e6-f30a-4209-
9d11e0989599b38d
Goals: company may make investments in the stock or bonds of another corporation typically to:
• return on otherwise idle funds (“passive” debt or stock securities of another company): ü return for stock
securities: dividends and appreciation in value; tax considerations ü return for debt securities: interest and
appreciation in value; tax considerations
• influence other company’s financial and operating policies and activities (equity method); indicators of significant
influence: acquire more than 20% of another company’s outstanding voting stock shares or membership on Board of
Directors of the investee or major supplier relationships; at any point, reflect all increases in ownership (share of
investee income less dividends declared)
• control another company because acquired more than 50% of outstanding voting stock of other corporation;
combined consolidated financial statements are presented since parent company and subsidiaries are viewed as
single economic entity. Separate income statements, balance sheets, and statements of cash flows are combined
each period on an item-by-item basis as a single set of consolidated financial statements. Intercompany transactions
and accounts are eliminated. Companies may seek diversification, acquisition of special assets or of unique
opportunities; vertical integration; cost savings (eliminate redundancies); quick entry into new domestic and foreign
markets; economies of scale (including negotiating power); more attractive financing opportunities given larger
capital base; diversification of business risk; business expansion; increasingly competitive environment. Companies
may retain legal identities and records as separate corporations or effect through dissolution (from survivor’s
standpoint only).
Summary view:
No influence: Significant Influence: Control:
§ Held-to-Maturity ▪ Equity method ▪ Consolidated Statements
§ Available-for-Sale
§ Trading Securities
ü trading: stocks or debt - actively traded for potential profit ü held to maturity: debt
with intent to keep until maturity
ü available for sale – not actively traded stock or bond investment; held for investment
returns; could sell but do not intend to sell in short term or keep until maturity (for
debt investment)
Events:
a) b uy : Trading, AFS, HTM, Investment (dr) " purchase price includes broker fees since necessary
Cash (cr)
b) earn return (revenue when interest earned and dividends declared by investor)
Downloaded by Brian kiarie ()
