Transfers between categories

Transfers between categories

a. result in companies omitting recognition of fair value in the year of the transfer.
b. are accounted for at fair value for all transfers.
c. are considered unrealized and unrecognized if transferred out of held-to-maturity into trading.
d. will always result in an impact on net income.


Answer: are accounted for at fair value for all transfers

"Gains trading" or "cherry picking" involves

"Gains trading" or "cherry picking" involves

a. moving securities whose value has decreased since acquisition from available-for-sale to held-to-maturity in order to avoid reporting losses.
b. reporting investment securities at fair value but liabilities at amortized cost.
c. selling securities whose value has increased since acquisition while holding those whose value has decreased since acquisition.
d. All of the above are considered methods of "gains trading" or "cherry picking."


Answer: selling securities whose value has increased since acquisition while holding those whose value has decreased since acquisition

A debt security is transferred from one category to another. Generally acceptable accounting principles require that for this particular reclassification (1) the security be transferred at fair value at the date of transfer, and (2) the unrealized gain or loss at the date of transfer currently carried as a separate component of stockholders' equity be amortized over the remaining life of the security. What type of transfer is being described?

A debt security is transferred from one category to another. Generally acceptable accounting principles require that for this particular reclassification (1) the security be transferred at fair value at the date of transfer, and (2) the unrealized gain or loss at the date of transfer currently carried as a separate component of stockholders' equity be amortized over the remaining life of the security. What type of transfer is being described?

a. Transfer from trading to available-for-sale
b. Transfer from available-for-sale to trading
c. Transfer from held-to-maturity to available-for-sale
d. Transfer from available-for-sale to held-to-maturity


Answer: Transfer from available-for-sale to held-to-maturity

When an investment in an available-for-sale security is transferred to trading because the company anticipates selling the stock in the near future, the carrying value assigned to the investment upon entering it in the trading portfolio should be

When an investment in an available-for-sale security is transferred to trading because the company anticipates selling the stock in the near future, the carrying value assigned to the investment upon entering it in the trading portfolio should be

a. its original cost.
b. its fair value at the date of the transfer.
c. the higher of its original cost or its fair value at the date of the transfer.
d. the lower of its original cost or its fair value at the date of the transfer.


Answer: its fair value at the date of the transfer

When an investment in a held-to-maturity security is transferred to an available-for-sale security, the carrying value assigned to the available-for-sale security should be

When an investment in a held-to-maturity security is transferred to an available-for-sale security, the carrying value assigned to the available-for-sale security should be

a. its original cost.
b. its fair value at the date of the transfer.
c. the lower of its original cost or its fair value at the date of the transfer.
d. the higher of its original cost or its fair value at the date of the transfer.


Answer: its fair value at the date of the transfer

A reclassification adjustment is reported in the

A reclassification adjustment is reported in the

a. income statement as an Other revenue or expense.
b. stockholders' equity section of the balance sheet.
c. statement of comprehensive income as other comprehensive income.
d. statement of stockholders' equity.


Answer: statement of comprehensive income as other comprehensive income