Classify each of the following items into one of the seven categories of financial assets relevant for financial reporting purposes. Select the category that best suits the situation given.
Financial asset category relevant for financial reporting purposes
a. Investment in 500 shares of Bank of Montreal. Management believes the shares are currently underpriced.
b. Investment in bonds maturing in two years. Management made the purchase to park idle cash until after two years, when it will make a major capital expenditure.
c. Investment in 800,000 shares of Calisto Corp., a public company with 2 million shares outstanding.
d. Purchase of 800 shares of Dupree Donuts, a private company with 1,000 shares out-standing.
e. Purchase of 1,000 shares of Epic Adventures, a public company with 10 million shares outstanding.
f. Investment in 60% of the outstanding shares of Fruitloops Fountains. An agreement with the company’s founder specifies that he retains the right to make all operating decision for Fruitloops.
g. St. George Company buys 15% of the outstanding shares of Gigantic Gargoyles. After the purchase, St. George appoints its chief executive office to the board of directors of Gigantic Gargoyles.
h. Investment in bonds maturing in 30 years.