Question

Could you give me an answer as fast as you can? Please..! Thank You!

Learning Objectives: Appendix E

1. Analyze and report investments in held-to-maturity debt securities
2. Analyze and report investments in available-for-sale securities
3. Analyze and report investments in affiliated companies using the equity method
4. Analyze and report controlling interests in other corporations using consolidated financial statements
5. Report investing activities on the statement of cash flows
6. Explain the impact of the time value of money on certain types of investments

EXAMPLE OF WHAT I'M LOOKING FOR:

One thing I found challenging was the credits and debits concept from chapter two and matching them up, (common stock would be a cash debit and stock credit). Once I got it down it was one of those "why didn't it make sense to me sooner" moments but at the time I didn't understand and would switch things. How I approached the chapter was really to make sure I understood all the terms, ie notes payable, accounts receivable, etc. Being able to understand them without going back to the textbook made the process a bit faster and overall easier. Another thing was really taking advantage of the internet and that if there was something in the textbook I didn't understand, looking it up on Google and going through different websites and tutorials. While going through the problems I made sure to take as thorough notes as I could with information that I knew would help me moving forward, targeting the problems that were difficult for me. Being able to go back and read through something that was written in a way that made the most sense to me as an individual definitely proved helpful. I also Skyped a friend who is currently enrolled in a financial accounting class and we would work through problems together.

Answer 1

1. Analyze and report investments in held-to-maturity debt securities - Held-to-maturity securities are purchased to be owned until maturity. A company's management might invest in a bond that they plan to hold to maturity. As a result, there are different accounting treatments for held-to-maturity securities compared to securities that are to be liquidated in the short-term. These financial assets are measured at amortized cost and usually recorded in the form of debt security with the particular maturity date.The most common form of held-to-maturity investments are bonds. This type of security is reported as an amortized cost on a company's financial statements and is generally in the form of a debt security with a specific maturity date. Unlike held-for-trading securities, temporary price changes for held-to-maturity securities do not appear in corporate accounting statements. Instead, the interest income received from a held-to-maturity security is reported on the income statement. Since stocks, or shares in a company, do not have a maturity date, they do not qualify as held-to-maturity securities.

2. Analyze and report investments in available-for-sale securities - It is s a debt or equity security purchased with the intent of selling before it reaches maturity or holding it for a long period should it not have a maturity date. Available for Sale Financial Assets are reported on the balance sheet at fair value. However, any unrealized gain and losses arising out in such securities are not recognized in the Income Statement but are reported in other comprehensive income as a part of shareholders’ equity. Any dividend received on such securities, interest income and actual gains and losses when the securities are sold are recognized in the Income Statement.

3. Investing activities on the statement of cash flows - Cash Flow from Investing Activities is the section of a company’s cash flow statement that displays how much money has been used in (or generated from) making investments in a specific time period. Investing activities include purchases of long-term assets (such as property, plant and equipment), acquisitions of other businesses, and investments in marketable securities (stocks and bonds).

Investing Activities Include:

• Purchase of fixed assets (negative cash flow)

• Sale of fixed assets (positive cash flow)

• Purchase of investment instruments, such as stocks and bonds (negative cash flow)

• Sale of investment instruments, such as stocks and bonds (positive cash flow)

• Lending of money (negative cash flow)

• Collection of loans (positive cash flow)

• Proceeds of insurance settlements related to damaged fixed assets (positive cash flow

4. The impact of the time value of money on certain types of investments - It is the idea that money that is available at the present time is worth more than the same amount in the future, due to its potential earning capacity. This core principle of finance holds that provided money can earn interest, any amount of money is worth more the sooner it is received. One of the most fundamental concepts in finance is that money has a time value attached to it. In simpler terms, it would be safe to say that a dollar was worth more yesterday than today and a dollar today is worth more than a dollar tomorrow. A dollar promised in the future is actually worth less than a dollar today because of inflation. Provided money can earn interest, this core principle of finance holds that any amount of money is worth more the sooner it is received. TVM can be broken up into two areas: present value and future value.