Following Are Four Independent Situations Describing the Investments of Four

question 202

Essay

Following are four independent situations describing the investments of four businesses:
1. At the end August each year, Summer BBQ Sales (SBS) has excess cash on hand. Management purchases 180 day Term Deposits (TD), which earn interest at 4% and which will mature in late February, just in time to purchase inventory for the next barbeque season. However, if the cash is needed earlier, the TDs will be cashed in early. SBS has no other investments.
2. Miller Distributors is active in a number of industries. Recently, Miller purchased 10% of the voting shares of Helen's Home Decorating Supplies, with the intention that if additional shares of Helen's become available, Miller will purchase enough shares to 3. Cole's Computers will invest excess cash by making private loans to employees up to $ 2,000 in order to generate interest income while assisting employees. The employees sign two-year interest bearing promissory notes and make monthly instalments including interest. At Cole's year end, total notes receivable from employees were $ 8,950. Unless the loans are in default, Cole does not expect to collect the loans before their maturity date.
4. Joudrey Holdings has accounts with several online brokers, and frequently buys and sells public company securities in an attempt to generate extra income. At Joudrey's year end, it owned shares in Big Rock Brewing Inc., Home Depot Canada, and Rogers Communications Inc.
Instructions
a) For each situation indicate if the investment is a strategic or non-strategic investment.
b) For each situation indicate if the investment should be reported at amortized cost, fair value, or reported using the equity method.
c) For each situation indicate if the investment should be reported in current assets or long-term assets.

---

Definitions:

Forming Department

A segment within a manufacturing facility where raw materials are shaped and formed into products.

Assembly Department

A segment of a manufacturing site dedicated to constructing end products from various components.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a certain activity base, such as labor hours or machine hours.

Direct Labor-Hours

The total hours worked directly on a specific task or project by employees who are considered part of the production process.