Evergreen Co. is planning to invest some of its excess cash in 5-year bonds issued by Continental Co. and in 2% of ordinary shares of Tang Co. Both Continentals bonds and Tangs shares are traded actively on securities market. Evergreen Co. plans to hold the bonds until the maturity date and trade the shares in short term. Regarding the accounting for these investments, answer the following questions:

1. How should Evergreen classify the bonds and the shares?

2. What is the accounting treatment for the Continental bonds? And what is the accounting treatment for the bonds if Evergreen has the following strategies?

1) an active trading strategy for the bonds or

2) a plan to sell the bonds in the long run.

3. Related to part 2, if Evergreen should change to a different accounting treatment for Continental bonds under an active trading strategy assumption, discuss the rationale behind the change.

4. What is the accounting treatment for the Tangs shares?

5. Discuss the difference(s) between accountings for trading and non-trading equity investments.