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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 13, Problem 1E
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 24GI
Problem 25GI
Problem 26GI
Problem 27GI
Problem 28GI
Problem 29GI
Problem 30GI
Problem 31GI
Problem 32GI
Problem 33GI
Problem 34GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 12RE
Problem 13RE
Problem 14RE
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Problem 1E
Problem 2E
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Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 20E
Problem 21E
Problem 22E
Problem 23E
Problem 24E
Problem 25E
Problem 26E
Problem 27E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 13P
Problem 14P
Problem 15P
Problem 16P
Problem 17P
Problem 18P
Problem 19P
Problem 20P
Problem 21P
Problem 22P
Problem 23P
Problem 24P
Problem 25P
Problem 26P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
33 views

Classification of Investments The following investments occurred in 2019 for Mole Company.

  1. a. Mole purchased a bond that will mature in 10 years. Mole purchased this bond because it expects that over the next 6 months, interest rates will fall, causing the bond price to increase. At that time. Mole plans to sell the bonds to earn a profit.
  2. b. Mole purchased $100,000 of Wilson Company’s convertible bonds. Mole has no intention of converting the bonds or selling the debt in the near future.
  3. c. e. Mole purchased 30% of the common stock in a supplier in an effort to have more input into the quality of the raw materials it receives.
  4. d. Mole purchased bonds for Collier Company with a face value of $100,000 for $95,000. The bonds pay interest of 8% semiannually. Mole has the ability and intent to hold the bonds to maturity and collect the principal and interest.
  5. e. Mole purchased 5% of the common stock of Brandon Company, a business with a history of paying large dividends. Mole wishes to hold these securities for the forseeable future in order to receive these dividends.

Required:

  1. 1. Classify each investment as either held-to-maturity, trading, available-for-sale, minority passive, or minority active investment.
  2. 2. Next Level Discuss the basis upon which the classification of each debt investment is based.
  3. 3. Next Level How would each of these investments be classified under IFRS?

1.

To determine

Identify the category under which each investments of Company M will fall.

Explanation

Investment: It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.

Three categories of investment in debt securities are as follows:

  • Trading securities
  • Held-to-maturity securities
  • Available-for-sale securities

Trading securities: These are the securities which are purchased to earn the profits due to changes in their market prices.

Held-to-maturity securities: These are the securities which are purchased with an intension to hold the securities till their maturity.

Available-for-sale securities: These are the securities which are not intended to be sold in the near future and there is no intension to hold the securities till their maturity.

Classify the investment made by Company M:

a. Company M purchased a 10-year bond with an intention to sell the bond after 6 months from the date of purchase to earn profit out of interest rate fluctuation...

2.

To determine

Identify the basis under which each debt investments are classified.

3.

To determine

Classify each of the investment of Company M under IFRS.

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Ch-13 P-1GICh-13 P-2GICh-13 P-3GICh-13 P-4GICh-13 P-5GICh-13 P-6GICh-13 P-7GICh-13 P-8GICh-13 P-9GICh-13 P-10GI
Ch-13 P-11GICh-13 P-12GICh-13 P-13GICh-13 P-14GICh-13 P-15GICh-13 P-16GICh-13 P-17GICh-13 P-18GICh-13 P-19GICh-13 P-20GICh-13 P-21GICh-13 P-22GICh-13 P-23GICh-13 P-24GICh-13 P-25GICh-13 P-26GICh-13 P-27GICh-13 P-28GICh-13 P-29GICh-13 P-30GICh-13 P-31GICh-13 P-32GICh-13 P-33GICh-13 P-34GICh-13 P-1MCCh-13 P-2MCCh-13 P-3MCCh-13 P-4MCCh-13 P-5MCCh-13 P-6MCCh-13 P-7MCCh-13 P-8MCCh-13 P-9MCCh-13 P-10MCCh-13 P-1RECh-13 P-2RECh-13 P-3RECh-13 P-4RECh-13 P-5RECh-13 P-6RECh-13 P-7RECh-13 P-8RECh-13 P-9RECh-13 P-10RECh-13 P-11RECh-13 P-12RECh-13 P-13RECh-13 P-14RECh-13 P-15RECh-13 P-16RECh-13 P-1ECh-13 P-2ECh-13 P-3ECh-13 P-4ECh-13 P-5ECh-13 P-6ECh-13 P-7ECh-13 P-8ECh-13 P-9ECh-13 P-10ECh-13 P-11ECh-13 P-12ECh-13 P-13ECh-13 P-14ECh-13 P-15ECh-13 P-16ECh-13 P-17ECh-13 P-18ECh-13 P-19ECh-13 P-20ECh-13 P-21ECh-13 P-22ECh-13 P-23ECh-13 P-24ECh-13 P-25ECh-13 P-26ECh-13 P-27ECh-13 P-1PCh-13 P-2PCh-13 P-3PCh-13 P-4PCh-13 P-5PCh-13 P-6PCh-13 P-7PCh-13 P-8PCh-13 P-9PCh-13 P-10PCh-13 P-11PCh-13 P-12PCh-13 P-13PCh-13 P-14PCh-13 P-15PCh-13 P-16PCh-13 P-17PCh-13 P-18PCh-13 P-19PCh-13 P-20PCh-13 P-21PCh-13 P-22PCh-13 P-23PCh-13 P-24PCh-13 P-25PCh-13 P-26PCh-13 P-1CCh-13 P-2CCh-13 P-3CCh-13 P-4CCh-13 P-5CCh-13 P-6CCh-13 P-7CCh-13 P-8C

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