Which of the Following Is the Major Difference Between the Accounting

question 90

Multiple Choice

Which of the following is the major difference between the accounting for equity securities and debt securities?

• A)Debt securities are classified as liabilities, while equity securities are classified as assets.
• B)Most equity securities are classified as held-to-maturity and most debt securities are classified as trading investments.
• C)The revenue from debt securities is interest, while revenue from equity securities is dividends.
• D)All debt securities have a maturity date whereas only a few equity securities have a maturity date.

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Definitions:

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific period.

Promissory Estoppel

A legal principle that prevents a party from backing out of a promise which led the other party to take action or abstain from it, based on the promise.

Illusory Promise

A statement that appears to be a promise but does not actually bind the party making it to any action or performance, rendering it unenforceable as a contract.

Release

A legal document or agreement resulting in one party forfeiting the right to make claims against another party in exchange for a settlement or relief.