All of the following statements are true regarding available-for-sale securities except a.changes in their fair values are not recognized on the income statement. b.they are recorded at fair value. c.a valuation allowance account is not used with available-for-sale securities. d.changes in their fair values are included as part of stockholders' equity.

All of the following statements are true regarding available-for-sale securities except a.changes in their fair values are not recognized on the income statement. b.they are recorded at fair value. c.a valuation allowance account is not used with available-for-sale securities. d.changes in their fair values are included as part of stockholders' equity.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 3Q

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Changes in the fair value of held to maturity securities are: A. not recognized. B. recognized on the income statement and as part of stockholders' equity. C. reported as part of stockholders' equity. D. recognized on the income statement.
Where are changes in the fair value of equity securities and reported? These fair values are readilydeterminable and the securities do not provide the owner with significant influence over the investee.a. as income or loss on the income statementb. as a component of accumulated other comprehensive income on the balance sheetc. as a prior-period adjustment to retained earnings on the balance sheetd. these value changes are not reported until the gain or loss is realized
Which of the following statements related to securities is not true: O Unrealized gains and losses related to available-for-sale securities are reported in earnings. O Held-to-maturity securities are recorded at amortized cost. O Equity securities without a readily determinable fair value are recorded at cost with impairment losses reported in earnings. O Unrealized gains and losses related to trading securities are reported in earnings.
Why are unrealized gains and losses on available-for-sale securities not reported in theincome statement, but instead are reported in other comprehensive income, and thenshown in accumulated other comprehensive income (AOCI) in the balance sheet?
For investments in available-for-sale securities, a debit balance in the Unrealized Holding Gain/Loss account reflects a cumulative unrealized gain. is reported as a negative element in the accumulated other comprehensive income section of shareholders' equity. is reported as a positive element in the accumulated other comprehensive income section of shareholders' equity. is reported as a positive element in the assets section of the balance sheet.
All of the following are true of the effect of fair value accounting on the financial statements except: a. any difference between the original cost or the prior period’s fair value must be recorded b. changes in the fair value of trading securities are recognized on the income statement c. valuation allowance accounts are reported on the balance sheet d. changes in the fair value of available-for-sale securities are recognized on the income statement
When the market value of a company’s portfolio of available-for-sale securities is lower than its cost，the difference should be: a. accounted for as a valuation allowance deducted from the asset to which it relates b. accounted for as an addition in the shareholders’ equity section of the balance sheet c. accounted for as a liability d. disclosed and described in a note to the financial statements but not accounted for.
Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the above
In subsequent periods after purchase, investments in available-for-sale securities will be reported at fair value. cost. face value. par value. 2. For investments in available-for-sale securities, a debit balance in the Unrealized Holding Gain/Loss account reflects a cumulative unrealized gain. is reported as a negative element in the accumulated other comprehensive income section of shareholders' equity. is reported as a positive element in the accumulated other comprehensive income section of shareholders' equity. is reported as a positive element in the assets section of the balance sheet.
choose the correct answer: 1. Trading securities are held with the intention of being sold in a short period of time 2. Trading securities unrealized holding gains or losses are reported in profit or loss. a. Only the first statement is correct. b. Only the second statement is correct. c. Both statements are correct. d. Both statements are incorrect.
All equity securities and investments in debt securities that are intended to be sold in the near term are classified as held-to-maturity securities. trading securities. available-for-sale securities. none of these choices. 2. Any change in the fair value of trading securities is reported on the income statement as part of net income. reported as part of other comprehensive income in the shareholders' equity section of the balance sheet. ignored; only the amortized cost is reflected in the financial statements. reported as a cash outflow in the investing activities section of the statement of cash flows. 3. A minority active investment with significant influence occurs when the investor owns between 10% and 20% of the voting common stock of the investee. over 50% of the voting common stock of the investee. between 20% and 50% of the voting common stock of the investee. over 50% of the preferred stock of the investee.
14. For available-for-sale securities, a decline in value due to a temporary decline in market value below cost is a. disclosed in the financial statements by means of a footnoteb. disclosed as a reduction from stockholders' equity on the balance sheetc. disclosed as a loss on the income statementd. not disclosed because the decline in value is only temporary