Memphis Company has just purchased five securities; it int
Question and Solution
Memphis Company has just purchased five securities; it intends to hold the stock until the price increases to a sufficiently high level, at which time it plans to sell the stock. In fact, it is unlikely that the company will hold the securities for more than a few months. Nevertheless, Memphis’s management has decided to classify the securities as available-for-sale rather than as trading securities. Why is Memphis choosing this type of classification, and would you allow it if you were the auditor?