Question
FASB Codification Case #3 Classification of Bond Investment Facts On December 1, YR01 Target Inc. purchased, as an investment, bonds issued by General Steel Co.
FASB Codification Case #3
Classification of Bond Investment
Facts
On December 1, YR01 Target Inc. purchased, as an investment, bonds issued by General Steel
Co. These bonds have a face amount of $1,000,000 and were purchased at 106. The management
of Target Inc. has the positive intent and financial ability to hold these bonds until they mature
on July 1, YR05. The bond indenture agreement includes a provision which permits General
Steel Co. to call the bonds any time after August 1, YR02. If the bonds are called General Steel
Co. is required to pay the full face amount of the bonds plus any accrued interest.
Question
Given Targets positive intent and financial ability to hold these bonds until they mature, how
should this bond investment be classified on the Target Inc. balance sheet at December 31,
YR01?
Required
1. Provide a brief written description of the proper classification of the bond investment on
Targets balance sheet.
2. Identify the specific paragraph of the FASB Codification which addresses this issue and
submit a printout of this paragraph with your solution.
Grade Value
This case counts as a bonus question (maximum 2 percentage points) for examination #2.
You must work independently on this case (this is not a group project).
Due Date
Start of our next class meeting.
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