Chapter 15, Problem 4BTN

To determine

(a)

Introduction:

Classification of Long term investments

Long term investments are capital intensive purchases of financial assets such as shares and stocks, bonds and debentures, property, land etc. that the company acquires with intent to retain the investments for a period exceeding one year or more.

There are four primary categories of long term investments:

• Held to Maturity Investments − They represent investments that the company intends to hold till the maturity of such instrument. It includes debt securities such as bonds.
• Available for sale Investments − They represent investments that the company intends to hold for a period exceeding one year but with an intention to sell at the best available opportunity in the foreseeable future.
• Significant Interest in Other companies − They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 25 % − 50 % of the outstanding equity shares of the other company.
• Controlling Interest in Other companies - They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 51 % or higher of the outstanding equity shares of the other company.

To Prepare:

Transactional data for acquisition of various types of long term securities

To determine

(b)

Introduction:

Classification of Long term investments

Long term investments are capital intensive purchases of financial assets such as shares and stocks, bonds and debentures, property, land etc. that the company acquires with intent to retain the investments for a period exceeding one year or more.

There are four primary categories of long term investments:

• Held to Maturity Investments − They represent investments that the company intends to hold till the maturity of such instrument. It includes debt securities such as bonds.
• Available for sale Investments − They represent investments that the company intends to hold for a period exceeding one year but with an intention to sell at the best available opportunity in the foreseeable future.
• Significant Interest in Other companies − They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 25 % − 50 % of the outstanding equity shares of the other company.
• Controlling Interest in Other companies - They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 51 % or higher of the outstanding equity shares of the other company.

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.
• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.
• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

Journal entries for acquisition of the long term investments.

To determine

(c)

Introduction:

Classification of Long term investments

Long term investments are capital intensive purchases of financial assets such as shares and stocks, bonds and debentures, property, land etc. that the company acquires with intent to retain the investments for a period exceeding one year or more.

There are four primary categories of long term investments:

• Held to Maturity Investments − They represent investments that the company intends to hold till the maturity of such instrument. It includes debt securities such as bonds.
• Available for sale Investments − They represent investments that the company intends to hold for a period exceeding one year but with an intention to sell at the best available opportunity in the foreseeable future.
• Significant Interest in Other companies − They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 25 % − 50 % of the outstanding equity shares of the other company.
• Controlling Interest in Other companies - They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 51 % or higher of the outstanding equity shares of the other company.

Information needed to complete period end closing for the long term investments

To determine

(d)

Introduction:

Classification of Long term investments

Long term investments are capital intensive purchases of financial assets such as shares and stocks, bonds and debentures, property, land etc. that the company acquires with intent to retain the investments for a period exceeding one year or more.

There are four primary categories of long term investments:

• Held to Maturity Investments − They represent investments that the company intends to hold till the maturity of such instrument. It includes debt securities such as bonds.
• Available for sale Investments − They represent investments that the company intends to hold for a period exceeding one year but with an intention to sell at the best available opportunity in the foreseeable future.
• Significant Interest in Other companies − They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 25 % − 50 % of the outstanding equity shares of the other company.
• Controlling Interest in Other companies - They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 51 % or higher of the outstanding equity shares of the other company.

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.
• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.
• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

Year end closing entries for long term investments

To determine

(e)

Introduction:

Classification of Long term investments

Long term investments are capital intensive purchases of financial assets such as shares and stocks, bonds and debentures, property, land etc. that the company acquires with intent to retain the investments for a period exceeding one year or more.

There are four primary categories of long term investments:

• Held to Maturity Investments − They represent investments that the company intends to hold till the maturity of such instrument. It includes debt securities such as bonds.
• Available for sale Investments − They represent investments that the company intends to hold for a period exceeding one year but with an intention to sell at the best available opportunity in the foreseeable future.
• Significant Interest in Other companies − They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 25 % − 50 % of the outstanding equity shares of the other company.
• Controlling Interest in Other companies - They represent investments made by a company in equity securities such as shares and stocks, of another company, usually in the range of 51 % or higher of the outstanding equity shares of the other company.

To Prepare:

Balance Sheet Section depicting long term investments