12: A.2. Investments Overview, Debt Securities Flashcards
(2 cards)
Which of the following is true about Held-to-Maturity securities?
A. They are equity securities like stocks
B. Unrealized gains go to OCI
C. They are reported at fair value
D. They are debt securities reported at amortized cost
The correct answer is D.
We report the HTM in the balance sheet, in amortized cost, which means we adjust the amount of the HTM premium or discount throw the years it matures. For
For example, we have a bond that we purchase from the government for 970,$ but the face value is 1000$, for 3 years. That means we will amortize the discount on the 3 years ( 30/3= 10) every year we add 10
with the interest
Dr. cash 50
Dr. Investment in HTM Securities 10
Cr. interest revenue 60
As you see, that’s it
Note: we don’t recognize the Unrevised HTM at all, not anywhere in the financial statement
How are unrealized gains/losses on held-to-maturity (HTM) securities reported?
A. In Net Income
B. In OCI
C. On the balance sheet as an adjustment
D. They are not reported at all
The correct answer is D. We do not report it at all
