Firms Sometimes Acquire Debt Securities with the Intention of Holding

question 31

Multiple Choice

Firms sometimes acquire debt securities with the intention of holding these securities until maturity.U.S.GAAP and IFRS require firms to measure marketable securities for which firms have an intent and ability to hold to maturity by _____.A firm initially records these debt securities at acquisition cost.This acquisition cost will differ from the maturity value of the debt if the coupon rate on the bonds differs from the _____.

• A)the imputed interest method; required market yield on the bonds at the time the firm acquired them
• B)the straight-line method; required market yield on the bonds at the time the firm acquired them
• C)the effective interest method; required market yield on the bonds at the time the firm acquired them
• D)the effective interest method; required market yield on the bonds at the time the bonds were originally issued.
• E)the straight-line method; required market yield on the bonds at the time the bonds were originally issued.

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Definitions:

Negative Cash Balance

A situation where a company or individual's cash account balance drops below zero, indicating that the account is overdrawn.

Current Liability

Short-term financial obligations that are due within one year or within a normal operating cycle.

Bank Indebtedness

The amount of debt owed to banks by an individual or corporation, typically arising from loans or overdrafts.

Payroll Liabilities

Financial obligations related to employee compensation, including owed wages, salaries, and other benefits, which a company must pay.