Libby Company Purchased Debt Securities for $100,000 and Classified Them

question 10

Multiple Choice

Libby Company purchased debt securities for $100,000 and classified them as available-for-sale securities on September 15,2019.At December 31,2019,the current fair value of the debt securities was $105,000.How should the investment be reported in the 2019 financial statements?

• A)The debt investment in available-for-sale securities would be reported on the balance sheet at its $100,000 cost.
• B)The $5,000 unrealized gain is reported within the income statement.
• C)The $5,000 realized gain is reported within the income statement.
• D)The debt investment in available-for-sale securities would be reported in the balance sheet at its $105,000 fair value and an unrealized holding gain on available-for-sale securities would be reported in the stockholders' equity section of the balance sheet.

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Definitions:

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular account or category.

Supply Costs

Expenses incurred in acquiring the goods or services needed to run a business, including raw materials, parts, and utilities.

Spending Variance

The difference between the actual amount spent and the amount that was budgeted for a particular period.

Square Feet

A unit of area measurement equal to a square that is one foot on each side, commonly used in real estate and interior planning.