Chapter 16, Problem 16.1Q

To determine

To explain: Debt investment can be classified as a current or non-current investment.

Answer to Problem 16.1Q

Debt investment can be classified as both current and non-current investment as it is the managements’ will to consider the debt as a current or non-current investment.

Explanation of Solution

Non-current investments:

Non–current investments are the long-term assets of the company that cannot be converted to cash within a year and expects to hold for more than one fiscal year.

Current investment:

Current investments are the short-term assets that are being expected to convert into cash within one year, these include inventory, accounts receivable.

Debt investments can be bonds, mortgages, fixed payments. It the management decision whether to treat the debt investment as a current investment or non-current investment. It is a less risky investment than the equity investment.

Conclusion

Hence,debt investment can be classified as both current and non-current investment.