Asked by Brooke Ramsey on May 13, 2024
Verified
Which of the following regarding available-for-sale securities is correct?
A) Available-for-sale securities are reported at cost on the balance sheet date, and unrealized holding gains and losses are included in income of the current period.
B) Available-for-sale securities are reported at fair value on the balance sheet date, and unrealized holding gains and losses are included in income of the current period.
C) Available-for-sale securities are reported at fair value on the balance sheet date, but unrealized holding gains and losses are not included in income of the current period.
D) Available-for-sale securities are reported at cost on the balance sheet date, but unrealized holding gains and losses are not included in income of the current period.
Available-for-Sale Securities
Financial assets that are neither held for trading immediately nor held to maturity, which can be sold in response to liquidity needs.
Unrealized Holding
Gains or losses on investments that a company has not yet sold, and therefore, has not realized the cash value from.
Fair Value
An estimate of the market value of an asset or liability based on current market conditions and willing buyer and seller dynamics.
- Familiarize yourself with the diverse classifications of investments (trading, available-for-sale, held-to-maturity) and the particular accounting practices attributed to each.
- Identify the consequences of unrealized holding gains and losses on net income and equity, relative to the category of investment.
Verified Answer
Learning Objectives
- Familiarize yourself with the diverse classifications of investments (trading, available-for-sale, held-to-maturity) and the particular accounting practices attributed to each.
- Identify the consequences of unrealized holding gains and losses on net income and equity, relative to the category of investment.
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