Exercise C-11 Classifying investments in securities; recording fair values LO C1

Question

Exercise C-11 Classifying investments in securities; recording fair values LO C1, P2, P3, P4 Information regarding Carperk Company's individual investments in securities during its calendar-year 2015, along with the December 31, 2015, fair values, follows a. Investment in Brava Company bonds: $371,600 cost, $403,929 fair value. Carperk intends to hold these b. Investment in Baybridge common stock: 29,500 shares; $295,422 cost, $321,124 fair value. Carperk cInvestment in Buffa common stock: 12,000 shares; $152,356 cost $164,240 fair value. This investment bonds until they mature in 2020. owns 32% of Baybndge's voting stock and has a significant infuence over Baybridge. amounts to 3% of But as outstanding shares, and a perk's goal with this investment is to earn dividends over the next few years d. Investment in Newton common stock: 3,500 shares; $84,725 cost, $83,285 fair value. Carperk's goa with this investment is to reap an increase in fair value of the stock over the next three to five years Newton has 30,000 common shares outstanding. e. Investment in Farmers common stock: 16,300 shares; $92,900 cost: $98,660 fair value. This stock is marketable and is held as an investment of cash available for operations. Required 1. Identify whether each investment should be classified as a short-term or long-term investment. For each ong-term investment, indicate in which of the long-term investment classifications it should be placed (Select "NA" in classification of long-term investment, if the type of investment is short term. Type of Investment Classification of Long-term Inv

Explanation / Answer

Answer:

1.

Debt securities are notes and bonds (a)

Equity securities, when there is significant influence involved with the investment (b)

Available-for-sale securities are debt or equity securities which can't be classified as trading or held-to-maturity securities.(c, d)

2.

As mentioned above the only two available-for-sale securities are c and d.

Note: There was no long-term investment prior to 2015.

Type of Investment Classification of Long-term Investment a Long-term Held-to-maturity debt securities (HTM) b Long-term Equity security c Long-term Available-for-sale securities (AFS) d Long-term Available-for-sale securities (AFS) e Short-term NA

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