Kroshka Holdings Corporation has several investments in debt and equity securities of other companies:
1. 10-year BCE bonds, intended to be held for the duration of the bonds
2. 10-year GE bonds, intended to be sold if interest rates go down
3. 5-year Government of Canada bonds, intended to be sold if cash is needed
4. A 180-day treasury bill
5. Bank of Montreal preferred shares, purchased for the dividend income
6. TMX common shares, purchased to sell in the near term at a profit. These shares are part of an investment portfolio that is actively traded.
Instructions:
a) Indicate whether each of the above investments is a passive or strategic investment
b) Indicate whether each of the above investments would be classified as a short-term (current assest) of long-term investment on Kroshka Holdings' balance sheet.
c) For each investment that you classified as passive in (a), indicate whether it is a held-for-trading, available-for-sale, or held-to-maturity security.
Kroshka Holdings Corporation has several investments in debt and equity securities of other companies:
1. 10-year BCE bonds, intended to be held for the duration of the bonds
2. 10-year GE bonds, intended to be sold if interest rates go down
3. 5-year Government of Canada bonds, intended to be sold if cash is needed
4. A 180-day treasury bill
5. Bank of Montreal preferred shares, purchased for the dividend income
6. TMX common shares, purchased to sell in the near term at a profit. These shares are part of an investment portfolio that is actively traded.
Instructions:
a) Indicate whether each of the above investments is a passive or strategic investment
b) Indicate whether each of the above investments would be classified as a short-term (current assest) of long-term investment on Kroshka Holdings' balance sheet.
c) For each investment that you classified as passive in (a), indicate whether it is a held-for-trading, available-for-sale, or held-to-maturity security.
Related questions
Amalgamated General Corporation is a consulting firm that alsooffers financial services through its credit division. From time totime the company buys and sells securities intending to earnprofits on short-term differences in price. The following selectedtransactions relate to Amalgamated's investment activities duringthe last quarter of 2016 and the first month of 2017. The onlysecurities held by Amalgamated at October 1 were $45 million of 10%bonds of Kansas Abstractors, Inc., purchased on May 1 at facevalue. The company's fiscal year ends on December 31.
2016
Oct. 18 Purchased 2 million preferred shares of MillworkVentures Company for $72 million as a speculative investment to besold under suitable circumstances.
Oct. 31 Received semiannual interest of $2.7 million from theKansas Abstractors bonds.
Nov. 1 Purchased 10% bonds of Holistic Entertainment Enterprisesat their $66 million face value, to be held until they mature in2018. Semiannual interest is payable April 30 and October 31.
Nov. 1 Sold the Kansas Abstractors bonds for $41 million becauserising interest rates are expected to cause their fair value tocontinue to fall.
Dec. 1 Purchased 12% bonds of Household Plastics Corporation attheir $70 million face value, to be held until they mature in 2028.Semiannual interest is payable May 31 and November 30.
Dec. 20 Purchased U. S. Treasury bonds for $6.6 million astrading securities, hoping to earn profits on short-termdifferences in prices.
Dec 21. Purchased 4 million common shares of NXS Corporation for$64 million as trading securities, hoping to earn profits onshort-term differences in prices.
Dec. 23 Sold the Treasury bonds for $6.9 million.
Dec. 29 Received cash dividends of $3 million from the MillworkVentures Company preferred shares.
Dec. 31 Recorded any necessary adjusting entry(s) and closingentries relating to the investments. The market price of theMillwork Ventures Company preferred stock was $34.50 per share and$17.50 per share for the NXS Corporation common. The fair values ofthe bond investments were $63.7 million for Household PlasticsCorporation and $17.7 million for Holistic EntertainmentEnterprises.
2017
Jan. 7 Sold the NXS Corporation common shares for $60million.
| Required: |
Prepare the appropriate journal entry for each transaction orevent. (If no entry is required for a transaction/event,select "No journal entry required" in the first account field.Enter your answers in millions rounded to 1 decimal place, (i.e.,5,500,000 should be entered as 5.5).) |
