The Investing Activities section of the statement of cash flows of Archer Daniels Midland Company (ADM), seller of agricultural commodities and products, follows. Based on the information given, answer the following questions. Instructions: 1. Based on all the buying and selling activity associated with ADMs marketable securities, how do you think the company classifies the bulk of its $3.0 billion
Based on the information given, answer the following questions.
1. Based on all the buying and selling activity associated with ADMs marketable securities, how do you think the company classifies the bulk of its $3.0 billion portfolio of securitiesas trading, available for sale, or held to maturity?
Now, take a look at ADMs note relating to its classification of all of its marketable securities. Marketable Securities The Company classifies its marketable securities as available-for-sale, except for certain designated securities which are classified as trading securities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of income taxes, reported as a component of other comprehensive income (loss). Unrealized gains and losses related to trading securities are included in income on a current basis. The Company uses the specific identification method when securities are sold or classified out of accumulated other comprehensive income (loss) into earnings.
2. Was your answer to (1) the same as ADMs classification policy? With the company selling one-third of its investment portfolio in 2004, are the companys actions consistent with its classification policy?
Finally, take a look at a portion of ADMs consolidated statements of shareholders equity from its 2004 annual report.
3. Assume that, other than available-for-sale securities, ADM had no other items that impacted other comprehensive income. Did the companys portfolio of marketable securities experience an unrealized net gain or an unrealized net loss for the year? If these securities had been classified as trading, where would this amount have beenreported?Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Authors: James D. Stice, Earl K. Stice, Fred Skousen