Carly Enterprises purchased 1,000 shares of the 1,000,000 common shares outstanding in Crush Inc.Carly intends to hold onto this investment for the forseeable future.How should this investment be classified on the books of Carly?

Question

Quizplus · Accepted Answer

The investment should be classified as an available-for-sale equity investment since Carly intends to hold onto it for the foreseeable future, but may sell it if the need arises. A held-to-maturity equity or debt investment would mean that Carly plans to hold the investment until it reaches maturity, which isn't applicable in this case. A trading equity investment implies that Carly intends to actively trade the investment, which isn't mentioned in the scenario.

Carly Enterprises Purchased 1,000 Shares of the 1,000,000 Common Shares