Amalgamated General Corporation Is A Consulting Firm

Amalgamated General Corporation Is A Consulting Firm That Also Offers

Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. During the last quarter of 2011 and the first month of 2012, the company engaged in various investment activities including purchasing and selling securities with the aim of earning profits on short-term differences in prices. The company's holdings as of October 1, 2011, were $27 million of 10% bonds of Kansas Abstractors, Inc., bought at face value on May 1, 2011. The fiscal year ends on December 31.

The transactions during this period included the purchase of preferred shares, bonds of various companies, and U.S. Treasury bonds, alongside sales and dividend receipts. The company also adjusted for fair values of securities and recorded necessary adjusting and closing entries at the end of 2011, with additional sales of securities occurring in early 2012. These activities reflect typical investment accounting processes, including recording purchases, sales, interest income, dividends, and unrealized gains or losses based on current fair values.

Sample Paper For Above instruction

Amalgamated General Corporation’s investment activities during the last quarter of 2011 and early 2012 demonstrate a comprehensive approach to managing trading and available-for-sale securities. Effective investment accounting is crucial for accurately depicting the firm's financial position and adherence to accounting standards such as GAAP, especially for financial institutions engaged in securities trading (Lunsford et al., 2010).

Initially, as of October 1, 2011, the company held bonds of Kansas Abstractors, Inc., at their face value of $27 million, which implies they were classified as held-to-maturity or available-for-sale depending on management’s intent (FASB, 2018). The purchase of preferred shares of Millwork Ventures, a speculative investment, indicates an intent to profit from market fluctuations, likely classified as trading securities. The subsequent dividends received and changes in fair value highlight typical investment income recognition and adjustment procedures (Kieso, Weygandt, & Warfield, 2019).

The sale of bonds of Kansas Abstractors at the end of October was driven by expectations of rising interest rates diminishing their market value, exemplifying active portfolio management. The recognition of a realized loss on sale aligns with the principle of comparing sale proceeds to carrying amount, with any difference recorded as a gain or loss in the income statement (Gibson, 2012). The fair value adjustments made at year-end reflect unrealized gains or losses, essential for valuation under the available-for-sale classification, impacting other comprehensive income (OCI) when applicable (FASB, 2018).

During the final months of 2011, the company acquired bonds of Household Plastics and Holistic Entertainment, emphasizing diverse holdings to spread risk in accordance with investment policies. The purchases of U.S. Treasury bonds and common shares of NXS Corporation, both held as trading securities, demonstrate an active trading approach aimed at short-term profits from fluctuations in market prices (Kieso et al., 2019).

In December 2011, the company recorded adjustments for unrealized gains based on the fair value of bonds and equities, aligning with fair value accounting principles, particularly for trading securities. The sale of NXS Corporation shares in January 2012 at a price slightly below the purchase price resulted in a realized loss, affecting the income statement. The fair value adjustments and realized gains or losses are meticulously reported to reflect accurate asset values and profit/loss recognition (Gibson, 2012).

Accounting for these investment transactions involves recording purchases at cost, recognizing interest income, dividends, and updating fair values at measurement dates. Gains or losses from sales are computed as the difference between sale proceeds and the carrying amount, with appropriate journal entries to reflect these transactions. Adjustments for unrealized gains or losses on securities are reported in accordance with GAAP, either through income statement or other comprehensive income, based on the classification (FASB, 2018).

By end-of-year closing entries and adjustments, Amalgamated General Corporation ensures its financial statements accurately represent the fair values, unrealized gains or losses, and realized gains or losses on investments. This comprehensive approach aligns with accounting standards and promotes transparency and accuracy in financial reporting for investment activities (Kieso et al., 2019).

• Gibson, C. H. (2012). Financial Reporting & Analysis. Cengage Learning.
• FASB. (2018). Accounting Standards Codification (ASC) 320 - Investments — Debt and Equity Securities.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th Edition). Wiley.
• Lunsford, A. A., Ruszkiewicz, J. J., & Walters, K. (2010). Everything’s an Argument with Readings. Bedford/St. Martin’s.

References

• Gibson, C. H. (2012). Financial Reporting & Analysis. Cengage Learning.
• FASB. (2018). Accounting Standards Codification (ASC) 320 - Investments — Debt and Equity Securities.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th Edition). Wiley.
• Lunsford, A. A., Ruszkiewicz, J. J., & Walters, K. (2010). Everything’s an Argument with Readings. Bedford/St. Martin’s.
• Gibson, C. H. (2012). Financial Reporting & Analysis. Cengage Learning.
• FASB. (2018). Accounting Standards Updates, Financial Accounting Standards Board.
• Weygandt, J. J., Kieso, D. E., & Kell, W. G. (2018). Intermediate Accounting. John Wiley & Sons.
• Choi, F. D. S., & Meek, G. K. (2011). International Accounting. Pearson.
• Revsine, L., Collins, D., & Johnson, W. (2015). Financial Reporting and Analysis. Pearson.
• Healy, P. M., & Palepu, K. G. (2012). Business Analysis & Valuation. Cengage Learning.