No significant influence equity investments: These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments. Given: I Railway will represent 5% of the voting stock of Company P for three months. To identify: How the given investment would be classified.

Question

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Answer 1

Question

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer

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Answer 2

Question

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer

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Answer 3

Question

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer

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Answer 4

Question

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer

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Answer 5

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer

Answer 6

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer

Answer 7

Chapter 10, Problem 1QC

To determine

No significant influence equity investments:

These investments are the investments in equity securities where the investor holds less than 20% of the voting stock, and thereby the investor would not be able to participate in the decisions of the investee company. These investments are reported as the current assets or the long-term assets on the basis of the period which the investor holds the investments.

Given:

I Railway will represent 5% of the voting stock of Company P for three months.

To identify: How the given investment would be classified.

Answer 8

Expert Solution & Answer

Explanation of Solution

When the investor invests in the debt or equity securities, holding less than 20% of the voting stock of the investee company, then such investment is known as no significant influence equity investment.

Hence, the correct answer is option b. no significant influence equity investment.

Justification for incorrect answers:

Option a. Significant interest investments are the equity securities where an investor holds more than 20%, but less than 50% of the voting stocks. Here, Railway I (investor) will own only 5% of the voting stock of Company P. Hence, option a. is incorrect answer.

Option c. Held-to-maturity investment is the investment which is held till their maturity date. Here, Railways I is not planning to hold the investment till maturity, but is planning to hold them for only three months. Hence, option c. is an incorrect answer.

Option d. Controlling interest investments are the equity securities where an investor holds more than 50% of the voting stocks. Here, Railway I will hold only 5% of the voting stock of the investee company. Hence, option d, is an incorrect answer.

Justification for correct answer:

Option b. As the investor company (Railway I) is considering investing in the investee company (Company P) representing less than 20% of the voting stock (5%) of the investee company, then such investment would be classified as a no significant influence equity investment.

Hence, option b. is the correct answer