BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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acquisition of the debt investment.
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receipt of interest revenue from the debt investment.
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a change in the name of the firm issuing the debt securities.
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sale of the debt investment.
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Detailed explanation-1: -If a sale or transfer of a debt security results in a tainting event, all remaining held-to-maturity securities should be reclassified to available for sale. Securities should not be classified as held to maturity for some period of time following the tainting of the portfolio.
Detailed explanation-2: -Available-for-sale (AFS) is an accounting term used to describe and classify financial assets. It is a debt or equity security not classified as a held-for-trading or held-to-maturity security-the two other kinds of financial assets. AFS securities are nonstrategic and can usually have a ready market price available.
Detailed explanation-3: -A debt security is an investment in bonds issued by the government or a corporation. At the time of purchasing a bond, the acquisition costs are recorded in an asset account, such as “Debt Investments.” Acquisition costs include the market price paid for the bond and any investment fees or broker’s commissions.
Detailed explanation-4: -Bonds (government, corporate, or municipal) are one of the most common types of debt securities, but there are many different examples of debt securities, including preferred stock, collateralized debt obligations, euro commercial paper, and mortgage-backed securities.