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.
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If the bonds in Question 8 are classified as available-for-sale, and they have a fair value at December 31, 2017, of $3,604,000, prepare the journal entry (if any) at December 31, 2017, to record this transaction.
On December 21, 2017, Zurich Company provided you with the following information regarding its trading investments.
December 31, 2017
Investments (Trading) Cost Fair Value Unrealized Gain (Loss)
Stargate Corp. shares \(20,000 \)19,000 \((1,000)
Carolina Co. shares 10,000 9,000 1000
Vectorman Co. shares 20,000 20,600 600
Total of portfolio \)50,000 \(48,600 \)(1,400)
Previous fair value adjustment balance-0-
Fair value adjustment-Cr. \((1,400)
During 2018, Carolina Co. shares were sold for \)9,500. The fair value of the shares on December 31, 2018, was Stargate Corp.
shares-\(19,300: Vectorman Co. shares-\)20,500
Instructions
(a) Prepare the adjusting journal entry needed on December 31, 2017.
(b) Prepare the journal entry to record the sale of the Carolina Co. shares during 2018.
(c) Prepare the adjusting journal entry needed on December 31, 2018.
Where can authoritative IFRS be found related to investments?
Explain the accounting for a service-type warranty.
In determining the amount of a provision, a company using IFRS should generally measure:
(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.
(b) Using the minimum amount of the loss in the range.
(c) Using the best estimate of the amount of the loss expected to occur.
(d) Using the maximum amount of the loss in the range.
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