Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following statements is true regarding investments in securities?

Only equity securities can be classified as held-to-maturity.

Investments in securities can be classified as trading, available-for-sale, or held-to-maturity.

Investments in securities are always recorded at their historical cost and never adjusted.

Debt securities cannot be classified as available-for-sale.

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Verified step by step guidance

Understand the classification of investments in securities: Investments in securities are categorized into three main types: trading, available-for-sale, and held-to-maturity. Each classification has specific accounting treatments and criteria.

Clarify the nature of held-to-maturity securities: Only debt securities can be classified as held-to-maturity because they must have fixed or determinable payments and a fixed maturity date. Equity securities cannot be classified as held-to-maturity.

Explain the accounting treatment for trading and available-for-sale securities: Trading securities are recorded at fair value, with unrealized gains or losses recognized in the income statement. Available-for-sale securities are also recorded at fair value, but unrealized gains or losses are reported in other comprehensive income.

Address the statement about historical cost: Investments in securities are initially recorded at their historical cost, but they are adjusted to fair value depending on their classification (trading or available-for-sale). Held-to-maturity securities are not adjusted to fair value unless impaired.

Clarify the classification of debt securities: Debt securities can be classified as trading, available-for-sale, or held-to-maturity, depending on the intent and ability of the investor to hold them.