Held-ToMaturity Trading AvailableFor-Sale Significant Influence Controlling Influence
Amortized Cost
Market Value Method
Equity Method
Consolidate
Reporting
Jun. 30 Cash Interest Revenue 30,000 30,000
To record receipt of interest on bonds
The same entry would be made on December 31, 2008.
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© The McGraw-Hill Companies, Inc., 2010
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C2
Basics of Accounting for Investments
Accounting Basics for Debt Securities Held-to-maturity (HTM) debt securities are recorded at cost when purchased. Interest revenue for investments in debt securities is recorded when earned.
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Procedural Learning Objectives
P1: Account for trading securities(交易性金 融资产） P2: Account for held-to-maturity (HTM) securities（持有至到期日金融资产） P3: Account for available-for-sale (AFS) securities（可供出售金融资产） P4: Account for equity securities with significant influence（重大影响）
Jan. 1
Cash Long-Term Investment - HTM
1,000,000 1,000,000
Cash received at bond maturity.
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Matrix Inc. Example: Cont’
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C1
Basics of Investments
Debt securities versus Equity securities
Debt securities – investments in notes, bonds, etc
15-1
Chapter 13
Investments
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Conceptual Learning Objectives
C1: Distinguish between debt and equity securities and between short-term and long-term investments C2: Identify and describe the different classes of investments in securities C3: Describe how to report equity securities with controlling influence
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C2
Basics of Accounting for Investments
Accounting Basics for Debt Securities On January 1, 2010, the bonds mature and Matrix would make the following entry:
Accounting Basics for Debt Securities Debt securities are recorded at cost when purchased. Interest revenue for investments in debt securities is recorded when earned.
Jan. 1
Long-Term Investment - HTM Cash
1,000,000 1,000,000
Purchased bonds to hold to maturity
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Basics of Accounting for Investments

On September 1, 2008, Matrix, Inc. paid Debt Inc. $1,000,000 for the bonds at par. The two-year Debt Inc. bonds have a stated rate of 6% annually. Interest is paid semi-annually on August 31 and February 28.
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*Matrix Inc. Example: Try!

On September 1, 2008, Matrix, Inc. paid Debt Inc. $1,200,000 for the bonds with a $1,000,000. The two-year Debt Inc. bonds have a stated rate of 6% annually. Interest is paid semi-annually on August 31 and February 28.
Equity securities – investments in stocks, etc
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Classes of and Reporting for Investments
Class of Investment
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Basics of Accounting for Investments
Accounting Basics for Debt Securities Debt securities are recorded at cost when purchased. Interest revenue for investments in debt securities is recorded when earned.
Cash Equivalents, Short-Term versus Long-Term Investments
Short-term investments:
are securities that management intends to convert to cash with one year or the operating cycle, whichever is longer. are readily convertible to cash.
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Basics of Investments
Cash Equivalents, Short-Term versus Long-Term Investments
Long-term investments: Short-term investments:
(1)Readily convertible to a known cash amount (2)Sufficiently close to due date (within 3 months)
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C1
Basics of Investments
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P1
Accounting Basics for Equity Securities (Non-influential)
Equity securities are recorded at cost when acquired, including commissions or brokerage fees paid. Any cash dividends received are credited to Dividend Revenue and reported in the income statement. When the securities are sold, sales proceeds are compared with cost, and any gain or loss is recorded.
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C1
Basics of Investments
Motivation for Investments