Question

The following information shows Carperk Company's individual investments in securities during its current year, along with the December 31 fair values.

1. Investment in Brava Company bonds: $324,250 cost; $352,460 fair value. Carperk intends to hold these bonds until they mature in 5 years.
2. Investment in Baybridge common stock: 29,500 shares; $257,779 cost; $280,206 fair value. Carperk owns 32% of Baybridge's voting stock and has a significant influence over Baybridge.
3. Investment in Duffa bonds: $132,943 cost; $143,313 fair value. This investment is not readily marketable and is not classified as held-to-maturity or trading.
4. Investment in Newton notes: $73,929 cost; $72,672 fair value. Newton notes are not readily marketable and are not classified as held-to-maturity or trading.
5. Investment in Farmers common stock: 16,300 shares; $81,063 cost; $86,089 fair value. This stock is marketable, and Carperk intends to sell it within the year. This stock investment results in Carperk having an insignificant influence over Farmers.

Required:
1. Identify whether each investment should be classified as a short-term or long-term investment. For each investment, indicate in which of the six investment classifications it should be placed.
2. Prepare a journal entry dated December 31 to record the fair value adjustment for the portfolio of available-for-sale debt securities. Carperk had no available-for-sale debt securities prior to this year.

Answer 1

Answer: Pgo O identify whether Each investment should be classified as a short from / long-term investment : Type of investment classification de long-terminustreat aelong taim investment Debat savestments, bald to materity belong taminustment Equity method investments 20).–501. belong term investment Avalable for sale debt securities dolong- teimloustacat Available for sale debt securities leashort term investments I stock investments -20%. Journal Entry General Journal Debit (6) Credit (6) fair value adjustment-available for sale $37,323 unrealized gain-debt Exploration: Cost fair value Gain/closs) $384250 $352,460 *28,210 $132,943 $143,313 d $23,924 442,672 ($1.9257) Total $531,182 14568,445 $37,223 37,303 с C KID310