On December 1, YR01 Target Inc. purchased, as an investment, bonds issued by General Steel Co. These bonds have a face amount of $1,000,000 and were purchased at 106. The management of Target Inc. has the positive intent and financial ability to hold these bonds until they mature on July 1, YR05. The bond indenture agreement includes a provision that permits General Steel Co. to call the bonds any time after August 1, YR02. If the bonds are called General Steel Co. is required to pay the full face amount of the bonds plus any accrued interest.

Question

 

Given Target’s positive intent and financial ability to hold these bonds until they mature, how should this bond investment be classified on the Target Inc. balance sheet at December 31, YR01?  

Required 

1. Provide a brief written description of the proper classification of the bond investment on Target’s balance sheet.

2. Identify the specific paragraph of the FASB Codification which addresses this issue and submit a printout of this paragraph with your solution. 

Answer rating: 100% (QA)

As per accounting standards the accounting and reporting for investments in equity securities that h... View the full answer