Asked by Kayli Swigart on Jul 26, 2024
Verified
The generally accepted accounting principles for trading securities include all of the following except
A) initially recording the investment at cost
B) subsequently valuing the investment at fair value
C) including unrealized holding gains and losses as a component of stockholders' equity
D) including interest and dividend revenue as part of income
Trading Securities
Financial securities that are purchased and held primarily for sale in the near term to generate income on short-term price differences.
Unrealized Holding
A profit or loss that arises from the change in value of an investment that has not yet been sold or realized.
- Understand and describe the different categories of investments (trading, available-for-sale, held-to-maturity) and their respective accounting treatments.
Verified Answer
VJ
Vaishali JohnnyJul 26, 2024
Final Answer :
C
Explanation :
Unrealized holding gains and losses for trading securities are reported in the income statement as part of net income, not as a component of stockholders' equity. Therefore, option C is incorrect. Options A, B, and D are generally accepted accounting principles for trading securities.
Learning Objectives
- Understand and describe the different categories of investments (trading, available-for-sale, held-to-maturity) and their respective accounting treatments.
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