Dell Computer Corporation has significant investment activities. The following items are from Dell’s 2009 financial statements (in millions):18

Short-term investments.............................$ 740

Long-term investments.................................454

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

Purchase of investments...........................1,584

Sales of investments..................................2,333

Change in unrealized gains (losses)

on long-term investments, net....................(29)

Dell states that all debt and equities 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 Computer’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?