Citibank under the Microscope

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized.

The SEC has probed certain Citigroup Inc debt funds to assess whether the bank made adequate disclosure to investors about the funds’ risk levels. Three California-based brokers, who worked for the then Citigroup unit Smith Barney, concluded the bank did not adequately disclose the funds’ risks and had also mismanaged them, the newspaper said, citing people familiar with the regulatory probe. Citigroup declined to comment in detail, citing the regulatory probe. However, Citi, denied misleading investors in a WSJ report.

Questions:
1. Assume a small business purchased $200,000 of Citigroup debt funds as an investment for its employee pension fund. What journal entry would it make?
2. Assume the same facts as in question 1. If the company still held these funds at March 2008, how would they account for the 77% decline?
3. Assume the same facts as in question 1 & 2. If the company was lucky enough to be offered the share buyback mentioned in the article, how would they record this transaction?

Source:

Staff. (2010). SEC Probes Citigroup Mortgage Debt Funds, Reuters, November 8. (Retrievable online at http://www.huffingtonpost.com/2010/11/08/sec-probes-citigroup-mort_n_780207.html)