Question #70

Reading: Reading 8 Intercorporate Investments

PDF File: Reading 8 Intercorporate Investments.pdf

Page: 31

Status: Unattempted

Part of Context Group: Q69-70
Shared Context
- What is the balance sheet carrying value of the securities under each of the classifications at year-end? FVPL FVOCI A) $71,500 $71,500 B) $90,000 $71,500 C) $90,000 $90,000
Question
If the bonds are reclassified as suggested by the chief investment officer, which of the following statements is most likely correct?
Answer Choices:
A. The difference between the amortized cost and fair value will be shown in other comprehensive income
B. The difference between the amortized cost and fair value will be shown in net income
C. The difference between the purchase price and fair value will be shown in other comprehensive income
Explanation
The bonds will be shown at amortized cost. When reclassified to FVPL, the bond will be restated at fair value and the difference taken to the income statement.
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