Investment in Debt securities: Debt securities are financing instrument which represents the loan taken from lender and usually these securities pay defined interest rate on the amount borrowed. The several types of debt instruments are bonds, certificate of deposits, preferred stock , corporate bonds etc. The investment in debt securities is classified under following categories: 1. Held to maturity: Held to maturity is a type of debt investment that the investor intends to hold till maturity. These securities are recorded at amortized cost. 2. Trading: Trading securities are purchased by the investor for the purpose to sell within a short term period to each profit. These securities are recorded at their fair value and any gain or loss in recognized in the income statement for that period. 3. Available for sale: All the other securities are considered as available for sale and these securities are recorded at their fair value and any gain or loss is recognized unrealized gain or loss until the securities are actually sold. To indicate: The recording of gain or loss on sale on disposing off an available for sale debt investment

Question

Want to see the full answer?

Answer 1

Question

Chapter 15, Problem 6RQ

To determine

Concept Introduction:

Investment in Debt securities: Debt securities are financing instrument which represents the loan taken from lender and usually these securities pay defined interest rate on the amount borrowed. The several types of debt instruments are bonds, certificate of deposits, preferred stock, corporate bonds etc. The investment in debt securities is classified under following categories:

1. Held to maturity: Held to maturity is a type of debt investment that the investor intends to hold till maturity. These securities are recorded at amortized cost.

2. Trading: Trading securities are purchased by the investor for the purpose to sell within a short term period to each profit. These securities are recorded at their fair value and any gain or loss in recognized in the income statement for that period.

3. Available for sale: All the other securities are considered as available for sale and these securities are recorded at their fair value and any gain or loss is recognized unrealized gain or loss until the securities are actually sold.

To indicate: The recording of gain or loss on sale on disposing off an available for sale debt investment

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Repsola is a drilling company that operates an offshore Oilfield in Feeland. Five yearsago, Feeland had a major oil discovery and granted licenses to drill oil to reputable,experienced drilling companies. The licensing agreement requires the company toremove the oil rig at the end of production and restore the seabed. Ninety percent ofthe eventual costs of undertaking the work relate to the removal of the oil rig andrestoration of damage caused by building it and ten percent arise through theextraction of the oil. At the Statement of Financial Position (SOFP) date (December 312025), the rig has been constructed but no oil has been extractedOn January 1st 2023, Repsola obtained the license to construct an oil rig at a cost of$500 million. Two years later the oil rig was completed. The rig is expected to beremoved in 20 years from the date of acquisition. The estimated eventual cost is 100million. The company’s cost of capital is 10% and its year end is December 31st. Repsolauses…

Maharaj Garage & Car Supplies sells a variety of automobile cleaning gadgets including a variety of hand vacuums. The business began the first quarter (January to March) of 2024 with 20 (Mash up Dirt) deep clean, cordless vacuums at a total cost of $126,800. During the quarter, the business completed the following transactions relating to the "Mash up Dirt" brand. January 8 January 31 February 4 February 10 February 28 March 4 March 10 March 31 March 31 105 vacuums were purchased at a cost of $6,022 each. In addition, the business paid a freight charge of $518 cash on each vacuum to have the inventory shipped from the point of purchase to their warehouse. The sales for January were 85 vacuums which yielded total sales revenue of $768,400. (25 of these units were sold on account to Mandys Cleaning Supplies, a longstanding customer) A new batch of 65 vacuums was purchased at a total cost of $449,800 8 of the vacuums purchased on February 4 were returned to the supplier, as they were…