Classify Each of the Following Items into One of the Seven

question 22

Essay

Classify each of the following items into one of the seven categories of financial assets relevant for financial reporting purposes. Select the category that best suits the situation given.
$\begin{array}{|l|lcc|}\hline& \text {Financial asset category relevant for}\\&\text { financial reporting purposes}\\\hline \text {Purchase of 1000 shares of Hobster Corp, a} & \\\text { public company with 10 million shares}\\\text { outstanding.}\\\hline \text {Investment in \( 60 \% \) of the outstanding shares of}&\\ \text {HKY Inc. An agreement with the company's}&\\ \text {founder specifies that he retains the right to make}\\ \text { all operating decisions for \( \mathrm{HK} \).}\\\hline \text {BEECorp. buys \( 15 \% \) of the outstanding shares of}\\ \text {CEE Corp. After the purchase, BEE appoints its}\\\\text { chief executive officer to the board of directors of}\\\text { CEE.}\\ \hline \text {Investment in 8,000 shares of CIBC. Management}\\ \text {believes that shares are currently underpriced.}\\\hline\end{array}$

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Definitions:

Marginal Cost

The financial increase due to the production of an extra product or service unit.

Artificially Scarce Good

A product or service whose availability is restricted through patents, copyrights, or other legal means, rather than by the limits of physical scarcity.

Pigouvian Tax

A tax imposed on activities that generate negative externalities, intended to correct an inefficient market outcome by internalizing the external costs.

Efficient Level

A point at which resources are allocated in the most effective manner, maximizing output without wasting resources.