Question: FASB Statement No. 115 was issued to change accounting methods and procedures with respect to investments in debt and equity securities. An important part of

FASB Statement No. 115 was issued to change accounting methods and procedures with respect to investments in debt and equity securities. An important part of the Statement concerns the distinction between trading securities, available for-sale securities, and held-to-maturity securities.

Required
1. Explain why a company invests in debt and equity securities.
2. Explain what factors a company should consider in determining which investments it should classify in each of the three categories, and how these factors affect the accounting treatment for unrealized gains and losses.

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