BMGT 220, Chapter 12 Discussion Kristian Sooklal 443-797-4588 (cell) | 410-575-4719 (text)

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Presentation transcript:

BMGT 220, Chapter 12 Discussion Kristian Sooklal (cell) | (text)

Plan for today Chapter 11 quiz Cash x (600) Treasury Stock 600/2000 * 110,000 = 33,000 Additional Paid in Capital 1,800 Cash = 34,800 Per share price = 34,800 /600 = 58 Total Dividends = Current Year Dividends on Preferred Stock + Owed Dividends On Preferred Stock + Dividends on Common Stock (current Year only) Decrease in retained earnings = % of dividend * shares outstanding * market price Cover Chapter 12 Practice Quiz See website for updates: –

Quiz Averages Syllabus – 9.37 Chapter 1 – 7.85 Chapter 2 – 8.2 Chapter 3 – 7.35 Chapter 5 – 5.91 Chapter 6 – 5.85 Chapter 8 – 5.19 Chapter 9 – 10 Chapter ? Chapter 11 – 5.61

% % % No significant influence usually exists Significant influence usually exists Control usually exists Investment valued using Cost Method Investment valued using Equity Method Investment valued on parent’s books using Cost Method or Equity Method (investment eliminated in Consolidation) Ownership Percentages Accounting for Stock Investments The accounting depends on the extent of the investor’s influence over the operating and financial affairs of the issuing corporation.

Investments Debt Equity Bonds Potential Entries: Purchase Earn Interest Receive Interest Sell Change in Fair Value Classifications: Trading Available for Sale Held to Maturity Stock Potential Entries: Purchase Paid Dividends Sell Change in Net Income Change in Fair Value Valuation Methods: Cost Equity Consolidation Classifications: Trading Available for Sale

Stock Investments Definition: Investments in capital stock of a corporation 0-20%20-50%50-100% Influence Not SignificantSignificantControl Value Method CostEquityConsolidation Trading Available- for-sale Held to Maturity

Debt Investments Definition: Investments in government or corporate bonds Journal Entries: – Purchase – Earn/Receive Interest – Sell – Change in Market Price Trading Available- for-sale Held to Maturity Classification Frequent buying and selling Intend to sell sometime in future Intend/able to hold to maturity

Held-to- Maturity Debt Investments (Bonds) Equity Investments (Stocks) Classification of Investments - Summary Trading Securities Available for Sale Securities

Significant Influence (20 to 50%) - Equity Method Debt Investments (Bonds) Controlling Influence (>50%) – Consolidated Financial Statements Equity Investments (Stocks) Trading Securities (<20%) Available for Sale Securities (<20%) Classification of Investments - Summary