ACCT 1020
Lesson 3 - Chapter 15
Investments and International Operations - New

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

Learning Activities
Achieve the learning objectives by completing each item listed below.

• Read Chapter 15 of your accounting text.
• Print and review the Accounting for Investments handout.
• Work Exercises 15-1 and 15-8 in your textbook to practice journalizing investment acquisition, investment disposition, and receipt of investment income.  Click the links below to check your answers.
  E15-1    E15-8
• Work Exercises 15-7 and 15-9 and Part 1 of Quick Study 15-10 in your textbook to practice recording market adjustments.  Click the links below to check your answers.
   E15-7   E15-9   QS15-10
• Work Exercise 15-13 in your textbook to practice journalizing investment transactions using the Equity Method. Click the link below to check your answers.
  E15-13
• Complete the homework assigned in Connect.

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.