Question

If the market value is lower than the cost of trading or available-for-sale investments, the investment is written down to market only if the decline is permanent and not temporary.

Question 12 options:

	a) True
	b) False

Question 13 (1 point)

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If the market value is lower than the cost of a held-to-maturity investment, the investment is written down to market only if the decline is permanent and not temporary.

Question 13 options:

	a) True
	b) False

Question 14 (1 point)

Unrealized gains and losses on available-for-sale securities are reported in the income statement.

Question 14 options:

	a) True
	b) False

Question 15 (1 point)

The Allowance to Adjust Securities to Market Value account cannot have a debit balance.

Question 15 options:

	a) True
	b) False

Question 16 (1 point)

Rhodes Corporation purchased 500 shares of Frenette common shares for $60 per share as a trading security. The market value at year-end was $62 per share. The shares were sold subsequent to the year-end for $65 per share. The gain or loss on the sale was a:

Question 16 options:

a)	$2,500 gain.

b)	$2,500 loss.

c)	$1,500 gain.

d)	$2,000 gain.

Answer 1

Part 1) False ---available for sale investments are recorded at fair value at every accounting period.any unrealized gain or loss to be reported under other comprehensive income

Part 2) True-------- since held to maturity investments are recorded at original purchase cost and will be recorded to lower market value in case of permanent impairment

Part 3) True------ unrealized gains and losses are to be reported under other comprehensive income under income statement

Part 4) False----- it can have both debit as well as credit balance on marking the assets upto fair value

Part 5)option c 1500 gain..... available for trade securities are reported at fair value with recording unrealized gain or loss. So already reported the unrealized gain of 1000