Question

Investments classified as trading securities should be measured on the statement of financial position at Multiple...

Investments classified as trading securities should be measured on the statement of financial position at

Multiple Choice

  • Acquisition cost.

  • Lower of cost or market for the portfolio.

  • Lower of cost or market for individual securities.

  • Fair value.

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Homework Answers

Answer #1

Answer: Fair Value

Explanation:

Trading securities refers to the stocks or bonds that company plans to purchase and sell in order to earn some short term money.These securities are traded regularly in the open market to make profits. Most of the times, these investments are traded on a daily basis. As Such , trading securities are always reflected on the balance sheet at the fair market value as it ensures that the amount reported on the financial statements reflects the proper economic impact of these investments. Further, the company is most likely sell these securtites within next 90 days or so. Thus, they should be reported at current market prices to report correctly of what the company could gain from them if a sales takes place today.

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