Asked by Pradeep Patil on Jun 25, 2024
Verified
When the market value of a company's available-for-sale investments is lower than its cost, the difference should be
A) reported as a liability
B) reported in the footnotes to financial statements
C) deducted from the investment in available-for-sale securities account
D) added to the investment in available-for-sale securities account
Market Value
The current price at which an asset or service can be bought or sold in a public market, often determined by supply and demand dynamics.
Available-For-Sale
A classification for financial assets indicating that they are available for sale before maturity or when they are not classified in other categories.
- Recognize the impact of market value changes on the accounting and reporting of available-for-sale securities.
Verified Answer
JS
Jonathan SanchezJun 27, 2024
Final Answer :
C
Explanation :
When the market value of a company's available-for-sale investments is lower than its cost, the difference should be deducted from the investment in available-for-sale securities account to reflect the decrease in value. This is done to follow the principle of conservatism, where losses are recognized immediately.
Learning Objectives
- Recognize the impact of market value changes on the accounting and reporting of available-for-sale securities.
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