Tara Enterprises has numerous investments in debt and equitysecurities. The controller, James Cameron is preparing its year-endfinancial statements and is in the process of classifying for thefirst time the securities in the portfolio. The poor economy in thepast year has caused the portfolio's overall fair value tosubstantially decline; however, some securities have increased invalue and others have decreased. Cameron earns a bonus each year,which is computed as a percent of net income. Cameron presents aschedule classifying the securities for the COO's review. Inreviewing the schedule the COO notices that the securities thathave increased in value have been classified as trading securitieswhile the securities that have decreased in value are classified aslong-term available-for-sale securities. 1. Who might be affectedby the suggested classification? 2. Will the suggestedclassification affect Cameron's bonus? Explain.
Tara Enterprises has numerous investments in debt and equitysecurities. The controller, James Cameron is preparing its year-endfinancial statements and is in the process of classifying for thefirst time the securities in the portfolio. The poor economy in thepast year has caused the portfolio's overall fair value tosubstantially decline; however, some securities have increased invalue and others have decreased. Cameron earns a bonus each year,which is computed as a percent of net income. Cameron presents aschedule classifying the securities for the COO's review. Inreviewing the schedule the COO notices that the securities thathave increased in value have been classified as trading securitieswhile the securities that have decreased in value are classified aslong-term available-for-sale securities. 1. Who might be affectedby the suggested classification? 2. Will the suggestedclassification affect Cameron's bonus? Explain.
