Norris Co. purchased $36,000 of marketable securities on March 1, Year 1. On the company’s fiscal year closing date, December 31, Year 1, the securities had a market value of $27,000. During Year 1, Norris Co. recognized $10,000 of revenue and $2,000 of expenses.

Required
a. Record a +, −, or NA in a horizontal statements model to show how the purchase of the securities affects the financial statements, assuming that the securities are classified as (1) held to maturity, (2) trading, or (3) available for sale. In the Statement of Cash Flows column, indicate whether the event is an operating activity (OA), investing activity (IA), or financing activity (FA). Record only the effects of the purchase event.

b. Determine the amount of net income that would be reported on the Year 1 income statement, assuming that the marketable securities are classified as (1) held to maturity, (2) trading, or (3) available for sale.

Transcribed Image Text:

Statement of Cash Flows Event No. Rev. Cash Inv. Sec. Exp. Net Inc. Type Held Trading Llab. + Equity 1. 2. Available 3.