Consider the following scenerio: an investor owns 30% of an investee company. The remaining 70% is...
Consider the following scenerio: an investor owns 30% of an investee company. The remaining 70% is owned by the investee's founder who has managed the company since its inception and takes no direction from "outsiders." How should the investor account for its investment?
Homework Answers
It would be treated as two types as follows.
1. Long term investments
2. Short term investments
(1). Long term investments :- Long term investments is an account on the asset side of the Individual/company balance sheet, that represents the investments including stocks, bonds etc.
Long term investments are the assets that an individual/company intends to hold for a period of more than 1 year.
(2). Short term investments:- Short term investments is an account on the asset side of the Individual/company balance sheet, that represents the investments including stocks and bonds etc.
Short term investments are the assets that an individual/company intends to hold for a period less than 1 year.
Conclusion:-
(a) It should be treated as Long term investments:- It would be shown under non current assets under sub heading non current investments/ Long term investments in the assets side of the balance sheet of the balance sheet of the company/Individual.
(b) it should be treated as Short term investments:- it would be shown under current investments under the head current assets in the assets side of the balance sheet either for Company/ individual.
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