128 - 1 Assume that Lomax does not plan to sell these securities in the short-term nor do they intend to hold the bonds until January 1 2021 a How would

128 - 1 Assume that Lomax does not plan to sell these...

This preview shows page 1 - 2 out of 3 pages.

1. Assume that Lomax does not plan to sell these securities in the short-term, nor do they intend to hold the bonds until January 1, 2021. a. How would they classify these bonds? (Trading, Available-for-Sale, Held-to- Maturity). Available-for-sale securities are debt and equity securities that are not held for trading, not held for strategic reasons, and not held to maturity. Moreover, an important characteristic of this changed security is that the company does into to profit from said bond by selling them in the short-term. The company’s lack of intent to sell said securities rules out their classification as trading securities; also, because the company will not hold the bonds until their maturity date in 2021, the bonds are not held-to-maturity securities. Therefore, Lomax’s securities are now classified as available-for-sale securities that will be valuated at fair value. Moreover, the securities’ unrealized holding gains or losses are
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 3 pages?

  • Summer '09
  • BAKER
  • Income Statement, Generally Accepted Accounting Principles, Lomax Company

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture