Which of the Following Is a Condition to Record an Investment

question 102

Multiple Choice

Which of the following is a condition to record an investment as an available-for-sale security?

• A)The investor plans to hold the debt security until it matures.
• B)The investor should have a significant interest in the voting stock of the investee.
• C)It must be a debt security.
• D)The ownership in the voting stock of the investee should be less than 20 percent.

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Definitions:

Deferral Method

An accounting method in which revenue or expenses are deferred to a future period to better match income with the expenses incurred to generate it.

Restricted Contribution

A donation or contribution to a nonprofit organization that has specific conditions or restrictions on its use by the donor.

Fixed Assets

Fixed Assets are long-term tangible assets, such as buildings, machinery, and equipment, used in the operation of a business and not expected to be converted to cash in the next year.

Operating Fund

A pool of resources designated for the ongoing operational expenses of an organization.