Fisher Corporation has the following investments at September 30,2016:

What method of accounting will Fisher use to account for its investment in Brooke,if the intent of the business model is to hold the investment for the purpose of collecting contractual cash flows of principal and interest?

Question

Fisher Corporation has the following investments at September 30,2016:

What method of accounting will Fisher use to account for its investment in Brooke,if the intent of the business model is to hold the investment for the purpose of collecting contractual cash flows of principal and interest?

Quizplus · Accepted Answer

When the intent of the business model is to hold the investment for the purpose of collecting contractual cash flows of principal and interest, the appropriate method of accounting is the amortized cost method. This method involves recognizing interest income over time and amortizing any premiums or discounts on the investment. The equity method is used when the investor has significant influence over the investee, fair value through other comprehensive income is used for debt securities and fair value through profit or loss is used for equity investments held for trading purposes.

Fisher Corporation Has the Following Investments at September 30,2016