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For Each of the Following Scenarios, State the Type of Investment

Question 62

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For each of the following scenarios, state the type of investment:

Premises:
Maxwell Inc. owns 70% of the voting stock of Russell Corp.
Millie Inc. owns a debt security of Auntie Inc. Millie intends to and has the ability to hold the debt security until maturity.
Eastern Inc. owns 32% of Western's voting stock. Eastern has the ability to exert influence over Western.
Golden Corp. owns a debt security in Yellow Corp. Golden plans on selling the debt after one year.
Horizon Inc. owns 18% of the voting stock of Sunset Corp. Horizon does not have the ability to participate in the decisions of Sunset.
Arnold Corp. owns a debt security in Brady Corp. Arnold plans on holding the debt for thirty days.
Responses:
Trading debt investment
Available-for-sale debt investment
Significant influence equity investment
Held-to-maturity debt investment
No significant influence equity investment
Controlling interest equity investment

Correct Answer:

Maxwell Inc. owns 70% of the voting stock of Russell Corp.
Millie Inc. owns a debt security of Auntie Inc. Millie intends to and has the ability to hold the debt security until maturity.
Eastern Inc. owns 32% of Western's voting stock. Eastern has the ability to exert influence over Western.
Golden Corp. owns a debt security in Yellow Corp. Golden plans on selling the debt after one year.
Horizon Inc. owns 18% of the voting stock of Sunset Corp. Horizon does not have the ability to participate in the decisions of Sunset.
Arnold Corp. owns a debt security in Brady Corp. Arnold plans on holding the debt for thirty days.
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