When an Investment in a Held-To-Maturity Security Is Transferred to an Available-For-Sale

question 43

Multiple Choice

When an investment in a held-to-maturity security is transferred to an available-for-sale debt security, the carrying value assigned to the available-for-sale debt security should be

• A) Its original cost
• B) Its fair value at the date of the transfer
• C) The higher of its original cost or its fair value at the date of the transfer.
• D) The lower of its original cost or its fair value at the date of the transfer.

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Definitions:

Trade Credit

An arrangement where a buyer can purchase goods on account without paying cash upfront, with payment to the seller due at a later date.

Inventory Obsolescence

Refers to the reduction in the value of inventory items due to them becoming outdated, no longer useful, or unsalable.

Opportunity Cost

The expense associated with choosing not to pursue the second-best option during decision-making.

Insurance Premium

The amount of money an individual or business must pay for an insurance policy, securing protection or coverage against specific risks.