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Prepared byMarianne Bradford, Ph.D.Bryant CollegeJohn Wiley Sons, Inc.Accounting Principles, 6e Weygandt, Kieso, KimmelCHAPTER 17 INVESTMENTSAfter studying this chapter, you should be able to:1 Discuss why corporations invest in debt and stock securities.2 Explain the accounting for debt investments.3 Explain the accounting for stock investments.4 Describe the use of consolidated financial statements.5 Indicate how debt and stock investments are valued and reported on the financial statements.6 Distinguish between short-term and long-term investments.InvestmentsAccounting for Debt InvestmentsWhy Corporations Invest?Recording acquisition of bondsRecording bond interestRecording sale of bonds ??PREVIEW OF CHAPTER 17InvestmentsAccounting for Stock InvestmentsValuation and Reporting of Investments??Holdings less than 20%Holdings between 20% and 50%Holdings of more than 50%Categories of securitiesBalance sheet presentationRealized and unrealized gain or lossComprehensive balance sheet?????PREVIEW OF CHAPTER 17STUDY OBJECTIVE 1Discuss why corporations invest in debt and stock securities.ILLUSTRATION 17-1 TEMPORARY INVESTMENTS AND THE OPERATING CYCLETemporary InvestmentsCashAccounts ReceivableInventoryAt the end of their operating cycles, many companies may have temporarily idle cash on hand until the start of the next operating cycle.These companies may invest the excess funds to earn a greater return.The relationship of temporary investments to the operating cycle is depicted below. InvestSellReasonTypical InvestmentTo house excess cash until neededLow-risk, high-liquidity, short-term securities such as government-issued securitiesDebt securities (banks and other financial institutions); and stock securities (mutual funds and pension funds)To generate earningsI need 1,000 Treasury bills by tonight!Stocks of companies in a related industry or in an unrelated industry that the company wishes to enterTo meet strategic goalsILLUSTRATION 17-2 WHY CORPORATIO