Ch 17

Question 1

Debt securities

Answer 1

Represents a creditor relationship with another entity

Question 2

Held to maturity

Answer 2

Debt securities that companies have a positive intent to hold till maturity

Question 3

Trading securities

Answer 3

Debt securities bought and held primarily for sale in the near term to generate income on short term prices differences

Question 4

What is amortized cost?

Answer 4

Acquisition cost adjusted for amortization of discount or premium if appropriate

Question 5

What is fair value?

Answer 5

Is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date

Question 6

A security can be classified as held to maturity if only both

Answer 6

1. Positive intent

2. The ability to hold those securities to maturity

Question 7

When companies report available for sale securities at fair value on the balance sheet. When do they report changes in fair value as part of net income?

Answer 7

They report them until after they sell the security

Question 8

What are equity securities?

Answer 8

Represent ownership interests such as common, preferred, or other capital stock

Question 9

Equity securities include rights such as

Answer 9

To acquire or dispose of ownership interests at an agreed upon or determinable price such as warrants, rights, and call or put options