Dell Computer Corporation has significant investment activities. The following items are from Dell’s 2010 financial statements (amounts are in millions):

Short-term investments ……………………… $ 373

Long-term investments ………………………          781

Investment income …………………………..           134

Purchase of investments ……………………. 1,383

Sales of investments ……………………….. . 1,538

Change in unrealized gains (losses) on long-term

 investments, net ……………………………                         6

Dell states that all debt and equity securities are classified as available-for-sale and are subject to an annual impairment test.

1. Where would you find each of the above items in Dell’s financial statements?

2. What value (cost or fair value) would you expect the first two items on Dell’s balance sheet to represent?

3. What are impairments, and how do they differ from unrealized losses on long-term investments?