What Factor Is the Most Important in Classifying an Investment

question 126

Multiple Choice

What factor is the most important in classifying an investment at fair value through other comprehensive income?

• A)Whether the instrument is a derivative instrument.
• B)Whether management intends to sell the instrument shortly after purchase.
• C)Whether gains will be realized in the next operating cycle.
• D)Whether the instrument has a fixed maturity date.

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Definitions:

By-Product

A secondary product derived from the manufacturing process that is not the primary product focus.

Net Realizable Value Method

An accounting method used to value an asset at the estimated selling price in the ordinary course of business, minus estimated costs of completion, disposal, and transportation.

Sequential Method

A cost allocation method where support departments' costs are allocated to production departments in a specific order, that somewhat reflects the level of services provided among support departments.

Support Departments

Units within an organization that provide essential services or support to the operational departments but do not directly participate in the primary activity of the business.