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Concept Introduction:
Classification of Investments:
The investments are classified on the basis of the two factors to be considered
1. Intent of the company
2. Length of time for which it will be held.
The three categories for investments are
i. Trading investments (Short-term investment)
The debt and equity securities investments will be classified as trading securities if they are purchased with an intention to be sold in a short time of their purchase. Suppose, 3 months or 4 months i.e. held with an intention to be sold in a short period.
ii. Available-for-sale investments (Long term as well as short term investment)
The debt and equity securities investments will be classified as available-for-sale investments if they are purchased with an intention to be sold in a longer time period say, more than a year. By default all the investments are classified as available-for-sale investments.
iii. Held-to-Maturity (Long term investment)
Held-to-maturity investments are the investments that are purchased with an intention to be held till maturity. When a purchase is made with an intent that it will be held till maturity, it will be classified as held-to-maturity investment.
Thus, short term investments include the investments which can be easily liquidated into the cash and are held with an intention to be sold within a short-term period. All the held-to-maturity investments will be considered as long-term investments.
To classify:
Classification of statements as long-term investments.
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Chapter 15 Solutions
FUND.ACCT.PRIN -ONLINE ONLY >I<
- Hello teacher please help me this problemarrow_forwardcorrect answer pleasearrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…arrow_forward
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