Chapter 12 Investments
Learning Objectives
After studying this chapter, you should be able to:
- Discuss why corporations invest in debt and stock securities.
- Explain the accounting for debt investments.
- Explain the accounting for stock investments.
- Describe the use of consolidated financial statements.
- Indicate how debt and stock investments are reported in financial statements.
- Distinguish between short-term and long-term investments.
Feature Story
“Is There Anything Else We Can Buy?”
In a rapidly changing world, you must change rapidly or suffer the consequences. In business, change requires investment.
A case in point is found in the entertainment industry. Technology is bringing about innovations so quickly that it is nearly impossible to guess which technologies will last and which will soon fade away. For example, will both satellite TV and cable TV survive, or will just one succeed? Or, will both be replaced by something else?
Consider the publishing industry as well. Will paper newspapers and magazines be replaced completely by online news? If you are a publisher, you have to make your best guess about what the future holds and invest accordingly.
Time Warner, Inc. lives ...
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