longtermasset.pptVIP

Long – term assets refer to those assets that will be realized or consumed within a period longer than one year of their acquisition. Investments Debt Securities Government or corporate debt obligations Equity Securities Corporate stock Trading and Available-For-Sale Investments Trading investments investments to be sold in very near future intent = generating profits on price changes Available-for-sale investments Investments other than trading securities investor cannot exercise significant influence over investee. Held-to-Maturity Investments Investor has intent and ability to hold until maturity Debt securities Long-term investment Trading Securities Recorded at cost at acquisition Interest revenue recorded as accrued (debt securities) Dividends recorded as revenue (equity securities) Carrying amount is adjusted to Market Value each period. Balance Sheet (partial) ASSETS Current assets: Short-term investments, at market value $65,000 Note: Dividend Revenue and Loss on Trading Securities appear on income statement as “Other revenue and expense” Available-for-Sale Securities Recorded at cost at acquisition Interest revenue recorded as accrued (debt securities) Dividends recorded as revenue (equity securities) Carrying value is adjusted to market value each period. Available-for-Sale Securities Carrying amount is adjusted to Market Value each period. Unrealized gains/losses may be recognized Selling investment can result in realized gain or loss. Held-to-Maturity If management has the intent and ability to hold to maturity, fluctuations in the market value is not relevant. Report at amortized cost in the balance sheet. Balance Sheet (partial) Assets Long-term assets: Available for sale investments, at cost $15,200 Plus allowance to adjust investment to market 2,800 $18,000 Stockholders’ Equity Common stock $xxxx Retained earnings xxxx Unrealized gain on investments 2,800 Total stockholders’ equity $xxxx Gains and Losses Notice: We are dealing with two k