case study

Project Description:

(issues raised about investment securities) you have just started work for andre love co. as part of the controller’s group involved in current financial reporting problems. jackie franklin, controller for love, is interested in your accounting background because the company has experienced a series of financial reporting surprises over the last few years. recently, the controller has learned from the company’s auditors that fasb statement may apply to its investment in securities. she assumes that you are familiar with this pronouncement and asks how the following situations should be reported in the financial statements.
situation 1
trading securities in the current assets have a fair value that is $4,200 lower than cost.
situation 2
a trading security whose fair value is currently less than cost is transferred to the available for sale category.
situation 3
an available for sale securities whose fair value is currently less than cost is classified as noncurrent but is to be reclassified as current
situation 4
a company’s portfolio of available for sale securities consists of the common stock of one company. at the end of the prior year the fair value of the securities was 50% of original cost, and this reduction in market value was reported as an other than temporary impairment. however, at the end of the current year that fair value of the security had appreciated to twice the original cost.
situation 5
the company has purchased some convertible debentures that it plans to hold for less than a year. the fair value of the convertible debentures is $7,700 below its cost.
what is the effect upon carrying value and earning for each of the situations above? assume that these situations are unrelated.
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Price Type: Negotiable

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