For Financial Reporting Purposes, Financial Assets Can Be Put into One

question 32

Essay

For financial reporting purposes, financial assets can be put into one of eight categories: subsidiaries, joint ventures, associates, held for trading, available for sale, held to maturity, joint operations, and loans and receivables. For each of the following items, identify the possible categories into which it can be placed. More than one category is possible for an item.

---

Definitions:

Preferred Stock

A class of stock that provides a specific dividend that is paid before any dividends are paid to common stock holders, and which typically has priority over common stock in the event of a liquidation.

Common Stock

A form of corporate equity ownership, representing a claim on a portion of a company's profits and a right to vote on some corporate decisions.

Capital Stock

The total amount of stock that a company is authorized to issue, representing ownership in the company.

Cumulative Preferred Stock

Preferred stock that, if the corporation doesn’t pay the specified percentage, has the unpaid amount (the dividend in arrears) carried over to the following year or years.