Kroshka Holdings Corporation has several investments in the debt
and equity securities of other companies:
1. | 10-year BCE bonds, purchased to earn interest. | ||
2. | 10-year GE bonds, intended to be sold if interest rates go down. | ||
3. | One-year Government of Canada bonds, purchased to earn interest. | ||
4. | 180-day treasury bill, intended to be held to earn interest. | ||
5. | Bank of Montreal preferred shares, purchased to sell in the near term at a profit. | ||
6. | Loblaw common shares, purchased to sell in the near term at a profit. | ||
7. | 60% of the common shares of Pizzutto Holdings Corporation, a major competitor of Kroshka Holdings. | ||
8. | 22% of the common shares of Kesha Inc., one of Kroshka Holdings’ suppliers. Assume Kroshka exercises significant influence over Kesha. |
(a) | Indicate whether each of the above investments is a non-strategic or strategic investment. | ||
(b) | Indicate whether each of the above investments would be classified as a current asset or non-current asset in Kroshka Holdings’ balance sheet. | ||
(c) | For each investment that you classified as non-strategic, indicate the amount the investment will be reported at in the balance sheet assuming that Kroshka is a public company. |
(a) | (b) | (c) | ||||||
---|---|---|---|---|---|---|---|---|
1. |
10-year BCE bonds |
select non-strategic or strategic StrategicNon-strategic | select current or non-current Non-currentCurrent | select an option Equity methodConsolidationAmortized costFair value | ||||
2. |
10-year GE bonds |
select non-strategic or strategic Non-strategicStrategic | select current or non-current CurrentNon-current | select an option Amortized costConsolidationEquity methodFair value | ||||
3. |
One-year Government of Canada bonds |
select non-strategic or strategic Non-strategicStrategic | select current or non-current CurrentNon-current | select an option ConsolidationEquity methodAmortized costFair value | ||||
4. |
180-day treasury bill |
select non-strategic or strategic Non-strategicStrategic | select current or non-current Non-currentCurrent | select an option Amortized costEquity methodFair valueConsolidation | ||||
5. |
Bank of Montreal preferred shares |
select non-strategic or strategic StrategicNon-strategic | select current or non-current CurrentNon-current | select an option Equity methodFair valueAmortized costConsolidation | ||||
6. |
Loblaw common shares |
select non-strategic or strategic StrategicNon-strategic | select current or non-current CurrentNon-current | select an option Amortized costConsolidationEquity methodFair value | ||||
7. |
Pizzutto Holdings common shares |
select non-strategic or strategic Non-strategicStrategic | select current or non-current Non-currentCurrent | |||||
8. |
Kesha Inc., common shares - 22% interest |
select non-strategic or strategic Non-strategicStrategic | select current or non-current CurrentNon-current |
Answer:
a. |
b. |
c. |
||
1. |
10-year BCE bonds |
Non-strategic |
Non-current |
Amortized cost |
2. |
10-year GE bonds |
Non-strategic |
Non-current |
Fair value |
3. |
One-year Government of Canada bonds |
Non-strategic |
Current |
Amortized cost |
4. |
180-day treasury bill |
Non-strategic |
Current |
Amortized cost |
5. |
Bank of Montreal preferred shares |
Non-strategic |
Current |
Fair value |
6. |
Loblaw common shares |
Non-strategic |
Current |
Fair value |
7. |
Pizzutto Holdings common shares |
Strategic |
Non-current |
|
8. |
Kesha Inc., common shares – 22% interest 1 |
Strategic |
Non-current |
1 Assume exercises significant influence
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