The Primary Difference in Accounting for Available-For-Sale Investments in Stock

question 111

Multiple Choice

The primary difference in accounting for available-for-sale investments in stock and accounting for trading investments in stock is which of the following?

• A)Measuring the fair value of the long-term and short-term investment portfolios on the balance sheet.
• B)Determination of the acquisition cost.
• C)Reporting of the unrealized holding gain or loss on investments within the financial statements.
• D)Determination of the unrealized holding gain or loss.

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Definitions:

Net Income

Net income is the total profit of a company after all expenses and taxes have been subtracted from total revenue, indicating the company's profitability.

Bonds Payable

Bonds payable are long-term debts issued by corporations or governments, where the issuer promises to pay the bondholder a specific sum of money at future dates.

Common Stock

A type of equity security that represents ownership in a corporation, usually with voting rights.

Cash Dividends

Payments made by a company out of its profits to shareholders, usually in the form of cash.