ACCT 1020
Lesson 3 - Chapter 15
Investments and International Operations

Introduction

In this lesson you will learn about accounting for investments.  You will look at investments in stocks (equity investments) and bonds (debt investments) from the investor's perspective.

You will journalize transactions for investment acquisition, investment income, and investment disposition. You will learn how to determine if you have a realized gain or loss on an investment and you will record appropriate entries to recognize gains or losses.  You will also learn when and how to record unrealized gains and losses and how those items affect the financial statements. Additionally, you will identify investments with significant influence and use the equity method of accounting for these investments.

Learning Objectives

  1. Describe the five classes of securities distinguishing between debt and equity and short-term and long-term investments
  2. Determine the cost of an investment and prepare journal entries for investment acquisition, income, and disposition
  3. Calculate, journalize, and report market adjustments for unrealized gains and  losses
  4. Calculate and report realized gains and losses upon disposition of securities
  5. Demonstrate the equity method of accounting for investments in equity securities

Assignments

  • Read Chapter 15 of your accounting text, view the PowerPoint presentation and/or complete the Chapter 15 LearnSmart assignment.
  • Review important terms for Chapter 15.
  • Review the Investments Overview handout.
  • Complete the Connect Interactive Presentations in the Practice folder for Chapter 15. 
  • Complete the required homework problems assigned in Connect. Click the Expand arrow for Chapter 15 in Connect, then click the Chapter Fifteen Homework link.

Summary

In this lesson you learned that there are different classifications of investments and you learned how to account for investments in these various classifications. You also learned how investments are reported on the financial statements and how both realized and unrealized gains/losses impact the financial statements.

In the next lesson, you will learn about the Cash Flow Statement.