Griffin Buys and Sells Securities and Typically Classifies Them as Available

question 135

Multiple Choice

Griffin buys and sells securities and typically classifies them as available for sale.On December 15,Griffin purchased $800,000 of Baker Corporation shares and elected the fair value option to account for the investment.As of December 31,the shares in Baker Corporation had a fair value of $875,000.In its December 31 financial statements,Griffin will report pretax ________.

• A)Investment income of $75,000 in its income statement
• B)Other comprehensive income of $75,000
• C)An investment in Baker Corporation of $800,000
• D)Accumulated other comprehensive income of $875,000

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Definitions:

Capital Budgeting

The process used by companies to evaluate and select long-term investments that are expected to yield the highest returns over time.

Cash Flows

The comprehensive total of funds circulating in and out of a business, markedly affecting its ability to liquidate assets.

Erosion

The gradual reduction or diminution of something, often referring to the wearing away of assets, margins, or competitive advantage over time.

New Product

An item or service that has been recently developed or introduced to the market.