Which of the following is the best description of investments in available-for-sale securities?

A) Investments in bonds that management intends to hold to maturity.
B) Investments in bonds that are held primarily for the purpose of selling them in the near future.
C) Investments in more than fifty percent of the voting stock of another company.
D) Investments in debt securities that are passive investments other than trading securities and held-to-maturity investments and are accounted for under the fair value method.

Question

Kristiqn Hristov · Accepted Answer

Final Answer : D, Explanation :  Investments in available-for-sale securities are investments that are not classified as either held-to-maturity or trading securities. They are debt securities that the company intends to hold for a period of time, but not until maturity. These investments are reported at fair value on the balance sheet, with unrealized gains and losses reported in other comprehensive income until they are sold. Choice D accurately describes these types of investments. Choices A and B are incorrect as they describe investments that are classified differently. Choice C describes investments in equity securities, not debt securities like available-for-sale securities.

Definitions

Learning Objectives

Learning Objectives

Related questions