Accounting for Investments – Bonds and Securities | Financial
Reporting Scenarios | Trading, AFS, and HTM Classifications
On January 1, 2021, Hoosier Company purchased $920,000 of 10% bonds at face value. The
bond market value was $975,000 on December 31, 2021. ✔✔Trading securities.
Securities available-for-sale.
Held-to-maturity securities-Changes in FV of held-to-maturity securities are not recorded.
fair value adjustment (ts)
Unrealized holding gain/losses (ni)
Fair value adjustment (ads)
Gain on investment unrealized (oic)
At year end, Mayce Co. held debt investments with the intent of selling them in the near term.
The investments consisted of $300,000, 9%, seven-year bonds, purchased for $278,000. Mayce
also held an investment in equity securities purchased for $75,000. At year end, the bonds were
selling on the open market for $320,000 and the equity securities had a market value of $90,000.
What amount should Mayce report for these investments in its year-end balance sheet?
✔✔reported on the balance sheet is their fair values of $320,000 and $90,000 for total of
$410,000.
Differences between cost and market values are considered temporary. Rock does not elect the
fair value option of accounting for available-for-sale securities. By what amount should Rock
increase (credit) its year 8 other comprehensive income? ✔✔Cost Market Value
Dec. 31, year 8 $ 80,000 $ 65,000
Dec. 31, year 9 $ 80,000 $ 90,000
$90,000 - $65,000 or $25,000, which will be reported in other comprehensive income.
Jeremiah Corporation purchased debt securities during 2021 and classified them as securities
available-for-sale:
Security Cost Fair Value, 12/31/2021
A $ 40,000 $ 49,000
B 70,000 66,000
C 28,000 39,000
All declines are considered to be temporary. How much gain will be reported by Jeremiah
Corporation in the December 31, 2021, income statement relative to the portfolio?
Reporting Scenarios | Trading, AFS, and HTM Classifications
On January 1, 2021, Hoosier Company purchased $920,000 of 10% bonds at face value. The
bond market value was $975,000 on December 31, 2021. ✔✔Trading securities.
Securities available-for-sale.
Held-to-maturity securities-Changes in FV of held-to-maturity securities are not recorded.
fair value adjustment (ts)
Unrealized holding gain/losses (ni)
Fair value adjustment (ads)
Gain on investment unrealized (oic)
At year end, Mayce Co. held debt investments with the intent of selling them in the near term.
The investments consisted of $300,000, 9%, seven-year bonds, purchased for $278,000. Mayce
also held an investment in equity securities purchased for $75,000. At year end, the bonds were
selling on the open market for $320,000 and the equity securities had a market value of $90,000.
What amount should Mayce report for these investments in its year-end balance sheet?
✔✔reported on the balance sheet is their fair values of $320,000 and $90,000 for total of
$410,000.
Differences between cost and market values are considered temporary. Rock does not elect the
fair value option of accounting for available-for-sale securities. By what amount should Rock
increase (credit) its year 8 other comprehensive income? ✔✔Cost Market Value
Dec. 31, year 8 $ 80,000 $ 65,000
Dec. 31, year 9 $ 80,000 $ 90,000
$90,000 - $65,000 or $25,000, which will be reported in other comprehensive income.
Jeremiah Corporation purchased debt securities during 2021 and classified them as securities
available-for-sale:
Security Cost Fair Value, 12/31/2021
A $ 40,000 $ 49,000
B 70,000 66,000
C 28,000 39,000
All declines are considered to be temporary. How much gain will be reported by Jeremiah
Corporation in the December 31, 2021, income statement relative to the portfolio?
