Chapter 13: Q17-6Q (page 658)
Question: Explain how trading debt securities are accounted for and reported?
Answer:
Trading debt securities are reported on their fair value.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
(Fair Value Option) Presented below is selected information related to the financial instruments of
Dawson Company at December 31, 2017. This is Dawson Company’s first year of operations.
Carrying Fair Value
Amount (at December 31)
Investment in debt securities (intent is to hold to maturity) \( 40,000 \) 41,000
Investment in Chen Company stock 800,000 910,000
Bonds payable 220,000 195,000
Instructions
(a) Dawson elects to use the fair value option for these investments. Assuming that Dawson’s net income is $100,000 in2017 before reporting any securities gains or losses determine Dawson’s net income for 2017. Assume that the differencebetween the carrying value and fair value is due to credit deterioration.
(b) Record the journal entry, if any, necessary at December 31, 2017, to record the fair value option for the bonds payable
Question: What factors must be considered in determining whether or not to record a liability for pending litigation? For threatened litigation?
BE13-10 (L03) Scorcese Inc. is involved in a lawsuit at December 31, 2017. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for $900,000 as a result of this suit. (b) Prepare the December 31 entry, if any, assuming it is not probable that Scorcese will be liable for any payment as a result of this suit.
Under what conditions should a provision be recorded?
Distinguish between a determinable current liability and a contingent liability. Give two examples of each type.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
