Principles of Accounting: Chapter Nine

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Chapter 9 covers the fundamental principles applicable to accounting for long-term investments. The specific method of accounting for a particular investment is largely governed by the intent of the investment. Investments may be acquired for their cash flow yields, to establish influence or control, and other reasons. The table presented near the beginning of the chapter summarizes the various scenarios and the applicable accounting. This table is followed by a detailed discussion of the accounting methods for the various alternatives. Be aware that entities may elect to apply a fair-value measurement option for many of their investments.

The final portion of the chapter introduces accounting for business combinations. A combination occurs when one company obtains a controlling ownership interest over another. The financial statements of both enterprises must be "consolidated" into a single set of financial statements. These statements frequently reflect goodwill and revised values for the subsidiary's assets and liabilities, based on the fair value of the acquired company as of the acquisition date.

Exercises

To aid in your understanding of this chapter, exercises with solutions are available for free download at Bookboon.com. You will find these exercises very helpful in providing models and guidelines for solving all of the problems at principlesofaccounting.com.

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Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Problems: Chapter Nine

Obtain the entire Long-Term Assets Problem Workbook via the linked image at left. Our high volume production process makes this an economical option as compared to printing these files on your own printer!



Basic		Problem	Worksheet	Combined	Objective

	B-9.01				Classification of investments

	B-9.02				Considering fair value standards

	B-9.03				Trading versus available for sale, and other comprehensive income

	B-9.04				Accounting for available-for-sale investments

	B-9.05				Bond investment purchased at par

	B-9.06				Bond investment purchased at a premium

	B-9.07				Bond investment purchased at a discount

	B-9.08				Accounting for equity method investments

	B-9.09				Basic consolidated balance sheet

	B-9.10				Goodwill in a consolidated balance sheet



Involved		Problem	Worksheet	Combined	Objective

	I-9.01				Stock investment accounting

	I-9.02				Bonds and amortization table

	I-9.03				Bond investment accounting

	I-9.04				Equity method accounting and analysis

	I-9.05				Preparing a consolidated balance sheet

	I-9.06				Team-based consideration of investment accounting

The preceding table includes links to "Basic" and "Involved" problems. Each link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically. If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear. The comments include useful suggestions for improving your spreadsheet skills.

Solutions to these problems may be obtained from your instructor, however you may not post or redistribute, electronically or otherwise, any such solution material. Solution material may be provided to you for your sole use only, at the discretion of your individual instructor. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found under the "Exercises" tab within each chapter. Video solutions to selected problems are available to students enrolling in the online course.