
Financial Accounting (11th Edition)
11th Edition
ISBN: 9780134127620
Author: Walter T. Harrison Jr., Charles T. Horngren, C. William Thomas, Wendy M. Tietz
Publisher: PEARSON
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Question
Chapter 8, Problem 1QC
To determine
To find: The correct option, the option which indicates the correct type of investment
Expert Solution & Answer

Explanation of Solution
Available-for-sale securities (AFSS): These are short-term or long-term investments in debt and equity securities with an intention of holding the investment for some strategic purposes like meeting liquidity needs, or manage interest risk.
Justification for correct answer: C’s investment in M’s Stock is less than 2%, so, the investment cannot be equity-method investment. C’s investment in M’s Stock is intended to be held for 3 years and sell off. Hence, it is classified as available-for-sale investment. Hence, option (c) is correct.
Justification for incorrect answers:
- Option (a) is incorrect answer because trading securities are short-term investments in debt and equity securities with an intention of trading and earning profits due to changes in market prices.
- Option (b) is incorrect answer because equity investments are stock instruments which claim significant influence of above 20% but less than 50% in the outstanding stock of the investee company.
- Option (d) is incorrect answer because consolidation is the type of investment which claims significant control and ownership of above 50% in the outstanding stock of the investee company.
Conclusion
Thus, option (c) is the correct answer.
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Chapter 8 Solutions
Financial Accounting (11th Edition)
Ch. 8 - Prob. 1QCCh. 8 - Prob. 2QCCh. 8 - Prob. 3QCCh. 8 - Prob. 4QCCh. 8 - Prob. 5QCCh. 8 - Prob. 6QCCh. 8 - Prob. 7QCCh. 8 - Prob. 8QCCh. 8 - Prob. 9QCCh. 8 - Prob. 10QC
Ch. 8 - Prob. 8.1ECCh. 8 - Prob. 8.1SCh. 8 - Prob. 8.2SCh. 8 - Prob. 8.3SCh. 8 - Prob. 8.4SCh. 8 - Prob. 8.5SCh. 8 - Prob. 8.6SCh. 8 - Prob. 8.7SCh. 8 - Prob. 8.8SCh. 8 - Prob. 8.9SCh. 8 - Prob. 8.10SCh. 8 - Prob. 8.11SCh. 8 - Prob. 8.12SCh. 8 - Prob. 8.13SCh. 8 - Prob. 8.14SCh. 8 - Prob. 8.15SCh. 8 - Prob. 8.16SCh. 8 - Prob. 8.17SCh. 8 - Prob. 8.18SCh. 8 - Prob. 8.19SCh. 8 - Prob. 8.20SCh. 8 - Prob. 8.21SCh. 8 - Prob. 8.22AECh. 8 - Prob. 8.23AECh. 8 - Prob. 8.24AECh. 8 - Prob. 8.25AECh. 8 - Prob. 8.26AECh. 8 - Prob. 8.27AECh. 8 - Prob. 8.28AECh. 8 - Prob. 8.29AECh. 8 - Prob. 8.30AECh. 8 - Prob. 8.31AECh. 8 - Prob. 8.32AECh. 8 - Prob. 8.33BECh. 8 - Prob. 8.34BECh. 8 - Prob. 8.35BECh. 8 - Prob. 8.36BECh. 8 - Prob. 8.37BECh. 8 - Prob. 8.38BECh. 8 - Prob. 8.39BECh. 8 - Prob. 8.40BECh. 8 - Prob. 8.41BECh. 8 - Prob. 8.42BECh. 8 - Prob. 8.43BECh. 8 - Prob. 8.44QCh. 8 - Prob. 8.45QCh. 8 - Prob. 8.46QCh. 8 - Prob. 8.47QCh. 8 - Prob. 8.48QCh. 8 - Prob. 8.49QCh. 8 - Prob. 8.50QCh. 8 - Prob. 8.51QCh. 8 - Prob. 8.52QCh. 8 - Prob. 8.53QCh. 8 - Prob. 8.54QCh. 8 - Prob. 8.55QCh. 8 - Prob. 8.56APCh. 8 - Prob. 8.57APCh. 8 - Prob. 8.58APCh. 8 - Prob. 8.59APCh. 8 - Prob. 8.60APCh. 8 - Prob. 8.61APCh. 8 - Prob. 8.62APCh. 8 - Prob. 8.63BPCh. 8 - Prob. 8.64BPCh. 8 - Prob. 8.65BPCh. 8 - Prob. 8.66BPCh. 8 - Prob. 8.67BPCh. 8 - Prob. 8.68BPCh. 8 - Prob. 8.69BPCh. 8 - Prob. 8.70CEPCh. 8 - Prob. 8.71CEPCh. 8 - Prob. 8.72CEPCh. 8 - Prob. 1DCCh. 8 - Prob. 2DCCh. 8 - Prob. 1EICh. 8 - Prob. 1FFCh. 8 - Prob. 1FA
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