Question: Identify and explain the three types of classifications for investments in debt securities.
Three types of debt security are hold-to-maturity, trading securities, and available-for-sale.
Debt securities are securities issued by the company that fulfill its cash need. In debt securities, the issuer promises to pay the amount on the date of maturity along with interest.
Three types of investment in debt securities:
2. Trading: It is the type of investment in which the investment is made to trade these securities. In this, the investor holds the security for the short-term and sells it when the price of security increases.
3. Available-for-Sale: The securities not included in the two other types of investment are included here. In this, the investor sells the securities after some years but before the maturity of the securities.
Francisco Corporation is constructing a new building at a total initial cost of $10,000,000. The building is expected to have a useful life of 50 years with no residual value. The building’s finished surfaces (e.g., roof cover and floor cover) are 5% of this cost and have a useful life of 20 years. Building services systems (e.g., electric, heating, and plumbing) are 20% of the cost and have a useful life of 25 years. The depreciation in the first year using component depreciation, assuming straight-line depreciation with no residual value, is:
(Depreciation for Fractional Periods) On March 10, 2019, Lost World Company sells equipment that it purchased for $192,000 on August 20, 2012. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $16,800 at the end of that time, and depreciation has been computed on that basis. The company uses the straight line method of depreciation.
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