/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q1SE_2 聽Identifying why companies inve... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 10: Q1SE_2 (page 567)

Identifying why companies invest and classifying investments

Garden Haven has excess cash of $15,000 at the end of the harvesting season. Garden Haven will need this cash in four months for normal operations.

Requirements

What type of classification would Garden Haven鈥檚 investment fall within鈥攕hort-term or long-term? Why?

Short Answer

Expert verified

The investment will be classified as a short-term investment.

Step by step solution

01

Definition of Short-Term Investment

The investment that can quickly generate cash for the business entity within one year is known as a short-term investment.

02

Classification of Investment

Garden will invest in the security that can be converted into cash within four months because the business entity will require cash. Therefore, such investment will be classified as short-term as it will be converted into cash within one year.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: P10-20A Accounting for equity investments

The beginning balance sheet of Waterfall Source Co. included a \(400,000 investment in Evan stock (20% ownership, Waterfall has significant influence over Evan). During the year, Waterfall Source completed the following investment transactions:

Mar. 3 Purchased 4,000 shares at \)11 per share of Lili Software common stock as a long-term equity investment, representing 7% ownership, no significant influence.

May 15 Received a cash dividend of \(0.61 per share on the Lili investment.

Dec. 15 Received a cash dividend of \)70,000 from Evan investment.

31 Received Evan鈥檚 annual report showing \(300,000 of net income.

31 Received Lili鈥檚 annual report showing \)120,000 of net income for the year.

31 Evan鈥檚 stock fair value at year-end was \(390,000.

31 Lili鈥檚 common stock fair value at year-end was \)12 per share.

Requirements

3. Prepare Waterfall Source鈥檚 partial balance sheet at December 31, 2018, from your answers in Requirement 2.

Accounting for debt investments

Suppose Solomon Brothers purchases $500,000 of 6% annual bonds of Morin Corporation at face value on January 1, 2018. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2022. Solomon intends to hold the Morin bond investment until maturity.

Requirements

1. Journalize Solomon Brothers鈥� transactions related to the bonds for 2018.

S10-1 Identifying why companies invest and classifying investments

Garden Haven has excess cash of $15,000 at the end of the harvesting season. Garden Haven will need this cash in four months for normal operations.

Requirements

1. What are some reasons why Garden Haven may choose to invest in debt or equity securities?

Question: P10-22B Classifying and accounting for debt and equity investments

Captain Transfer Corporation generated excess cash and invested in securities as follows:

2018

Jul. 2 Purchased 4,200 shares of Naradon, Inc. common stock at \(13.00 per share. Captain Transfer plans to sell the stock within three months, when the company will need the cash for normal operations. Captain Transfer does not have significant influence over Naradon.

Aug. 21 Received a cash dividend of \)0.40 per share on the Nardon stock investment.

Sep. 16 Sold the Naradon stock for \(13.70 per share.

Oct. 1 Purchased a Purple bond for \)40,000 at face value. Captain Transfer classifies the investment as trading and short-term.

Dec. 31 Received a \(600 interest payment from Purple.

31 Adjusted the Purple bond to its market value of \)44,000.

Requirements

Classify each of the investments made during 2018. (Assume the equity investments represent less than 20% of ownership of outstanding voting stock.)

Accounting for debt investments

Peyton Investments completed the following investment transactions during 2018:

2018

Jan. 5 Purchased Vedder Company鈥檚 \(400,000 bond at face value. Peyton classified the investment as available-for-sale. The Vedder bond pays interest at the annual rate of 4% on June 30 and December 31 and matures on December 31, 2021. Management鈥檚 intent is to keep the bonds for several years.

Jun. 30 Received an interest payment from Vedder.

Dec. 31 Received an interest payment from Vedder.

31 Adjusted the investment to its current market value of \)396,000

Requirements

Prepare a comprehensive income statement for Peyton Investments for year ended December 31, 2018. Assume net income was $200,000.
See all solutions

Recommended explanations on Business Studies Textbooks

Actuarial Science in Business

Read Explanation

Organizational Behavior

Read Explanation

Operational Management

Read Explanation

Business Data Analytics

Read Explanation

Financial Performance

Read Explanation

Public Relations Business Studies

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.