Elyse Inc Made the Following Investments During Its 2012 Fiscal Year

Elyse Inc. made the following investments during its 2012 fiscal year.
a. The company places $3,000 in a 8-month term deposit with its bank.
b. The company purchases from its broker a call option on 2,500 shares of BMO Financial, a publicly traded company, for $5,500, in anticipation of an increase in the stock price.
c. The company buys 30% of the outstanding shares of NEXT Corp. The purchase was made in anticipation of a bid by BEFORE Corp. to purchase all of the shares of NEXT within the next nine months.
d. The company buys $35,000 of shares in a publicly traded corporation with a market capitalization of more than $20 billion.
Required:
Identify how the company should categorize the above financial assets. Briefly explain the reason for the classification.

Correct Answer:

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a. Held to maturity (or loans and receiv...

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