Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
6th Edition
ISBN: 9780134486840
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 10, Problem 10.1CA
To determine

Trading Debt Investments:

Trading debt investments are the investments in debt securities where the investors wish to sell these investments at a short notice like in a few days, week, or months to generate some profit out of it. They are treated as current assets.

Available-for-sale debt investments:

Available-for-sale debt investments are the investments in debt securities, which are neither referred as trading debt investments nor referred to as held-to-maturity debt investments. The investors do not wish to hold them till maturity, and hence reported either as current assets or as long-term assets in the balance sheet depending upon the holding period of the security.

Unrealized-gain or Unrealized-loss:

Unrealized-holding gain or loss occurs when the investor company record the investments at its fair value, in its financial statements, without disposing (selling) them. When the cost of the investment is lesser than the fair value of the investment, then it is unrealized-gain. On the contrary, when the cost of the investment is greater than the fair value of the investment, then it is unrealized-loss.

To explain: The difference between trading debt investments, and available-for-sale debt investments.

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Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)

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