On November 15, 2009, Torborg Company purchased short-term marketable equity securities in Radar Corporation and Booker Corporation. The following valuation of Twins' portfolio in short-term investments on December 31, 2009 is:
It is management policy that only one of its short-term investments can be classified as trading, while the other, therefore, must be classified as available-for-sale. Because Torborg's 2009 income exceeds market expectations and its 2010 income prospects are suspect, the management desires to classify its short-term investments so that 2010 income is maximized. On January 11, 2010, Torborg Company sells its investments in Radar and Booker for $40,000 and $39,000, respectively.
In order to achieve management's desires, which investment should be classified as trading and which as available-for-sale? Numerically justify your response.

Question

On November 15, 2009, Torborg Company purchased short-term marketable equity securities in Radar Corporation and Booker Corporation. The following valuation of Twins' portfolio in short-term investments on December 31, 2009 is:
  It is management policy that only one of its short-term investments can be classified as trading, while the other, therefore, must be classified as available-for-sale. Because Torborg's 2009 income exceeds market expectations and its 2010 income prospects are suspect, the management desires to classify its short-term investments so that 2010 income is maximized. On January 11, 2010, Torborg Company sells its investments in Radar and Booker for $40,000 and $39,000, respectively.
In order to achieve management's desires, which investment should be classified as trading and which as available-for-sale? Numerically justify your response.

Quizplus · Accepted Answer

The Answer of On November 15, 2009, Torborg Company purchased short-term marketable equity securities in Radar Corporation and Booker Corporation. The following valuation of Twins' portfolio in short-term investments on December 31, 2009 is:
  It is management policy that only one of its short-term investments can be classified as trading, while the other, therefore, must be classified as available-for-sale. Because Torborg's 2009 income exceeds market expectations and its 2010 income prospects are suspect, the management desires to classify its short-term investments so that 2010 income is maximized. On January 11, 2010, Torborg Company sells its investments in Radar and Booker for $40,000 and $39,000, respectively.
In order to achieve management's desires, which investment should be classified as trading and which as available-for-sale? Numerically justify your response.

On November 15, 2009, Torborg Company Purchased Short-Term Marketable Equity