Background:

Corporations frequently invest in securities issued by other corporations. Some investments are acquired to secure a favorable business relationship with another company. On the other hand, others are intended only to earn an investment return from the dividends or interest the securities pay or from increases in the market prices of the securitiesthe same motivations that might cause you to invest in stocks, bonds, or other securities. This diversity in investment objectives means no single accounting method is adequate to report every investment.

Merck & Co., Inc., invests in securities of other companies.

Required:

1.What is the amount and classification of any investment securities reported on the balance sheet? In which current and noncurrent asset categories are investments reported by Merck? What criteria are used to determine the classifications?

2.How are unrealized gains or losses reported? Realized gains and losses?

3.Are any investments reported by the equity method?

4.What amounts from equity method investments are reported in the comparative income statements?

5.Are cash flow effects of these investments reflected in the company's comparative statements of cash flows? If so, what information is provided by this disclosure?