are investments in government and corporation bonds Chapter 12 Investments I Why Companies Invest A Excess Cash 1 Usuall low risk high liquidity 2 Can cash our in downturn B Genreate Earnings from Investment Income C Strategic Reasons 1 buying out compeditors 2 merging with a new company II Accounting for Debt Investments A Debit Investments a Acquitition b c Sale B READ 572 Interest revenue III Accounting for Stock Investments A Stock Investments B Holdings of less then 20 a Cost Method are investments in the capital stock of other corporations revenue only when cash dividends are received companies record investment at cost and recognize C Holdings of between 20 and 50 a Equity Method investee in the years when it is earned the investor record its share of the net income of the D Holdings of 50 liabilities controlled by the parent company a Consolidated Financial Statements present the total assets and is the amount for which a security could be sold in a IV Valuing and Reporting Statements A Fair Value Method normal market B Categories of Securities are bought and held primarily for sale in the near a Trading Securities term to generate income on short term price differences b Available for Sale Securities sometimes in the future c Held to Maturity Securities intent and ability to hold to maturity are held with the intent of selling them are debt securities that the investor has the V Balance Sheet Presentations A Short Term Investments Marketable Security are securities held by the company that are readily marketable and intended to be converted to cash whithen the next year an investment is readily marketable when it can be 1 Readily Marketable sold easily whenever the need for cash arises Intended to Convert next year or operating cycle 2 B Long term Investments are recorded as current assets management intends to sell the investment within the
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