1. Acct 387 - Chapter 181 Investments In general, investments in debt and equity securities are categorized as three types: Held to maturity (debt securities only) - securities that will be held until they mature and principal will be repaid; enterprise must demonstrate positive intent and ability to hold to maturity. Trading - bought and held primarily for sale in the near term to generate income on short-term price differences; often help for a matter of days Available for sale - securities not categorized as the other two.

2. Acct 387 - Chapter 182 Debt Securities

3. Acct 387 - Chapter 183

4. 4 Available for Sale and Other Comprehensive Income Unrealized losses are included as a component of comprehensive income and are shown on the balance sheet in the stockholder's equity section. When an unrealized gain/loss becomes realized, it goes into net income. Thus it has to be removed from unrealized gains/losses. Thus there are essentially 2 components to the comprehensive income adjustment: (1) holding gains/losses during period and (2) previously recognized holding gains/losses that were realized this year.

5. Acct 387 - Chapter 185 Equity Method Use when you have influence which is presumed at 20% ownership. Try to make your balance in account equal your proportionate share of investee's equity. Treat your share of investee's income as investment income. Treat dividends as a reduction of investment. Amortize difference paid over investee's book value

6. Acct 387 - Chapter 186 Consolidation If you own over 50%, consolidate the records of the two companies when preparing financials Still use equity method on parent's books

7. Acct 387 - Chapter 187 Transfers between Categories All transfers are at market value. Gains and losses recognized in income for transfers between available for sale and trading or back. When transferring from held to maturity to available for sale, transfer at fair value, but take unrealized gain/loss directly to equity. When transferring for available for sale to held to maturity, transfer at fair value and amortize unrealized gain/loss over remaining life.