Depletion, Depreciation, and Investment
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1. Anna is studying the annual reports of three different companies that her accounting group will use for its term project. She sees that two of the companies have made investments in the common stock of Ebay, Inc. What concerns her is that one company has reported the investment as a current asset, while the other company has reported its investment as a long-term asset. Explain to Anna why it is permissible in certain circumstances for the same type of asset to be reported differently.
2. The accounting terms depletion and depreciation describe basically the same thing.
Do you agree with the above statement? Explain why or why not.
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Solution Summary
The solution explains the accounting terms - depletion and depreciation and investment classification.
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1. It depends on the intent of the management. If the investment is to be sold in a period of one year or less, it would be classified as trading securities and shown as a part of current assets.
If management intends ...
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