Required:

Under ASPE, financial assets can be put into one of six categories: subsidiaries, joint ventures, associates, portfolio equity investment, debt investment, and derivatives. For each of the above investments, identify the possible categories into which it can be placed. More than one cat- egory is possible for some items.

P7-9. Classifying financial assets

Consider the following eight investments.

1. Investment in 500 shares of Bank of Montreal. Management believes the shares are cur-

   rently underpriced.

2. Investment in bonds maturing in two years. Management made the purchase to park idle

   cash until after two years, when it will make a major capital expenditure.

3. Investment in 800,000 shares of Calisto Corp., a public company with 2 million shares

   outstanding.

4. Purchase of 800 shares of Dupree Donuts, a private company with 1,000 shares

   outstanding.

5. Purchase of 1,000 shares of Epic Adventures, a public company with 10 million shares

   outstanding.

6. Investment in 60% of the outstanding shares of Fruitloops Fountains. An agreement with

   the companys founder specifies that he retains the right to make all operating decisions for

   Fruitloops.

7. St. George Company buys 15% of the outstanding shares of Gigantic Gargoyles. After the

   purchase, St. George appoints its chief executive office to the board of directors of Gigantic

   Gargoyles.

8. Investment in bonds maturing in 30 years.