Question

5 ercise 15 - 15 (algo) classifying investments in securities; recording fair values lo c1, p2, p3, i, p5
the following information shows carperk companys individual investments in securities during its current year, along with december 31 fair values.
a. investment in brava company bonds: $336,850 cost; $366,156 fair value. carperk intends to hold these bonds until they mature in 5 years.
b. investment in baybridge common stock: 29,500 shares, $267,796 cost; $291,094 fair value. carperk owns 32% of baybridges voting stock and has a significant influence over baybridge.
c. investment in duffa bonds: $138,109 cost; $148,882 fair value. this investment is not readily marketable and is not classified as held - to - maturity or trading.
d. investment in newton notes: $76,802 cost; $75,496 fair value. newton notes are not readily marketable and are not classified as held - to - maturity or trading.
e. investment in farmers common stock: 16,300 shares; $84,213 cost; $89,434 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.
complete this question by entering your answers in the tabs below.
required 1 required 2
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.
investment
investment in brava company bonds: $336,850 cost; $366,156 fair value. carperk intends to hold these bonds until they mature in 5 years.
investment in baybridge common stock: 29,500 shares; $267,796 cost; $291,094 fair value. carperk owns 32% of baybridges voting stock and has a significant influence over baybridge.
investment in duffa bonds: $138,109 cost; $148,882 fair value. this investment is not readily marketable and is not classified as held - to - maturity or trading.
investment in newton notes. $76,802 cost; $75,496 fair value. newton notes are not readily marketable and are not classified as held - maturity or trading.
investment in farmers common stock: 16,300 shares; $84,213 cost; $89,434 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.

Explanation:

• Investment in Brava Company bonds: Held - to - maturity. Since Carperk intends to hold until maturity (5 years), it is a long - term investment.
• Investment in Baybridge common stock: Equity method. With 32% voting stock and significant influence, it is a long - term investment.
• Investment in Duffa bonds: Long - term investment. Not readily marketable and not held - to - maturity or trading.
• Investment in Newton notes: Long - term investment. Not readily marketable and not held - to - maturity or trading.
• Investment in Farmers common stock: Short - term investment (trading). Marketable and intended to be sold within a year with insignificant influence.

Answer:

Investment	Type of Investment	Classification of Long - term Investment
Investment in Baybridge common stock	Long - term	Equity method
Investment in Duffa bonds	Long - term	Other long - term investments
Investment in Newton notes	Long - term	Other long - term investments
Investment in Farmers common stock	Short - term	Trading