You have been asked to prepare the disclosures for your company's investments. In accumulating the information,
you find holdings of 10,000 shares of General Motors Corp. preferred stock purchased for $30 per share. It traded yesterday at $29.00 per share. In addition, you identify $100,000 in Series D Bonds from Apple with an interest rate of 1.55%. The company also holds a 35% interest in Temple Holdings, a joint venture with passive ownership. It originally invested $200,000.
Required - Under Fair Value Accounting Principles: (in detail -- be specific - using definitions)
1) Describe how you would value the GM preferred stock and whether it would be classified as a Level 1, 2, or 3 asset.
2) Describe how you would value the Apple bonds. The Series D bonds generally trade with a low volume, though the Series C bonds have the same interest rate and term with good volume. Describe how you would value the bonds and if you would classify them as Level 1, 2, or 3 holdings.
3) Describe how you would value the partnership interest. Would it be classified as Level 1, 2 or 3 and why?