Reference no: EM133122923

Question - The following information shows Carperk Company's individual investments in securities during its current year, along with the December 31 fair values.

1. Investment in Brava Company bonds: $355,650 cost; $386,592 fair value. Carperk intends to hold these bonds until they mature in 5 years.

2. Investment in Baybridge common stock: 29,500 shares; $282,742 cost; $307,341 fair value. Carperk owns 32% of Baybridge's voting stock and has a significant influence over Baybridge.

3. Investment in Duffa bonds: $145,817 cost; $157,191 fair value. This investment is not readily marketable and is not classified as held-to-maturity or trading.

4. Investment in Newton notes: $81,088 cost; $79,710 fair value. Newton notes are not readily marketable and are not classified as held-to-maturity or trading.

5. Investment in Farmers common stock: 16,300 shares; $88,913 cost; $94,426 fair value. This stock is marketable, and Carperk intends to sell it within the year. This stock investment results in Carperk having an insignificant influence over Farmers.

Required -

1. Identify whether each investment should be classified as a short-term or long-term investment. For each investment, indicate in which of the six investment classifications it should be placed.

2. Prepare a journal entry dated December 31 to record the fair value adjustment for the portfolio of available-for-sale debt securities. Carperk had no available-for-sale debt securities prior to this year.