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

Krissa purchases a 10-year bond as an investment. Which of the following best describes how this investment should be classified on her company's balance sheet under U.S. GAAP?

As an intangible asset

As a liability

As a current asset

As a long-term investment in securities

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Verified step by step guidance

Understand the nature of the investment: A bond purchased as an investment is a financial instrument that represents a long-term commitment, typically held for more than one year.

Review the classification criteria under U.S. GAAP: Investments in securities are classified based on their intended holding period and purpose. Long-term investments are those intended to be held for more than one year and are not expected to be liquidated in the short term.

Determine the appropriate balance sheet category: Since Krissa purchased a 10-year bond, the investment is intended to be held for a long duration, making it a long-term investment rather than a current asset.

Exclude other classifications: The bond is not an intangible asset because it is a tangible financial instrument. It is also not a liability because it represents an asset owned by the company, not an obligation owed.

Conclude the classification: Under U.S. GAAP, the bond should be classified as a long-term investment in securities on the company's balance sheet, reflecting its nature and intended holding period.