For each of the following pieces of information, indicate whether you think it is a Level 1, Level 2, or Level 3 input:
A. The company owns stock in a company that is actively traded on NASDAQ. The information is the closing price on the stock on that date.
B. The company trades in oil. It owns a large amount of oil that is similar to, but not exactly the same as, the kind of oil traded on commodities exchanges. Typically, the kind of oil on the exchange has sold for 10 cents per gallon more than the oil owned by the company. The company uses prices from the commodities exchange for similar oil, and reduces those prices by 10 cents to reflect the historical difference in prices.
C. The company has made a contract to supply fuel to an important customer for a fixed price for two years. The company’s internal models indicate the contract will have a profit of $200,000.
D. The company has acquired another business, which sells clothing.
GAAP requires it to value the inventory of the company it has acquired at fair value. The data the company uses is recent selling prices of the clothing from the stores it acquired.
E. The company invests in a collection of home mortgages. Similar but not identical collections of mortgages are sold by certain dealers who specialize in putting together these packages of mortgages. To value the collection of mortgages it owns at December 31, the company used prices paid by dealers for similar collections of mortgages that day.