1 answer

The following information shows Carperk Company's individual investments in securities during its current year, along with...

Question:

The following information shows Carperk Company's individual investments in securities during its current year, along with the December 31 fair values.

  1. Investment in Brava Company bonds: $324,250 cost; $352,460 fair value. Carperk intends to hold these bonds until they mature in 5 years.
  2. Investment in Baybridge common stock: 29,500 shares; $257,779 cost; $280,206 fair value. Carperk owns 32% of Baybridge's voting stock and has a significant influence over Baybridge.
  3. Investment in Duffa bonds: $132,943 cost; $143,313 fair value. This investment is not readily marketable and is not classified as held-to-maturity or trading.
  4. Investment in Newton notes: $73,929 cost; $72,672 fair value. Newton notes are not readily marketable and are not classified as held-to-maturity or trading.
  5. Investment in Farmers common stock: 16,300 shares; $81,063 cost; $86,089 fair value. This stock is marketable, and Carperk intends to sell it within the year. This stock investment results in Carperk having an insignificant influence over Farmers.

Required: 1. Identify whether each investment should be classified as a short-term or long-term investment. For each investment, indicate in which of the six investment classifications it should be placed.
2. Prepare a journal entry dated December 31 to record the fair value adjustment for the portfolio of available-for-sale debt securities. Carperk had no available-for-sale debt securities prior to this year.


Answers

Answer: Pgo O identify whether Each investment should be classified as a short from / long-term investment : Type of investme

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