Question

1.The Vendome Corporation has purchased 100 shares of stock of the Ford Motor Company, which is...

1.The Vendome Corporation has purchased 100 shares of stock of the Ford Motor Company, which is listed on the New York Stock Exchange. Would this purchase be recorded as an investment or as short-term investment? State the reason for your conclusion.

2.The Eller Corporation has purchased 100 percent of the outstanding stock of the Jewel Company. Would this purchase be recorded as an investment or as marketable securities? State the reason for your conclusion.

3.DORO, Inc., has purchased 1,000 shares of Goldfinders, Inc., from its founder. There is no ready market for this stock. Would this purchase be recorded as an investment or as marketable securities? State the reason for your conclusion.

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Answer #1

Answer to Question 1.

The purchase of 100 Shares of Ford Motor Company could be recorded as Investment or Short Term Investment, depending upon the intention of Management to hold the Securities. If Management wants to hold the Securities for Short Term period i.e. for a period upto 1 year then it will be classified as Short Term Investment else Investment.

Since, the Shares are listed on Stock Exchange and can be easily traded, i would recommend to record as Short Term Investment.

Answer to Question 2.

Acquisition of 100 percent Stock of a Company would be recorded as Investment, as the 100% shares would not have been acquired to trade on Stock.

Answer to Question 3.

The purchase of 1,000 Shares of Goldfinders Inc. would be recorded as Investment, as there is no market for these stocks and cannot be traded.

  

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