CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following statements is (are) true with respect to the classification of securities for accounting purposes?

I. For held-to-maturity securities, unrealized gains and losses, in addition to interest income, may be recorded as part of income.
II. For trading securities, unrealized gains and losses, in addition to interest and dividend income, may be recorded as part of income.
III. Available-for-sale securities are carried in a balance sheet at their fair market values.
IV. Any unrealized gain or losses resulting from an available-for-sale security must be reported on an income statement as a separate item.
A. I and II
B. II and III
C. II and IV
Explanation: I is incorrect because for held-to-maturity securities, only realized gains and losses, in addition to interest income, may be recorded as part of income.

IV is incorrect because any unrealized gain or losses resulting from an available-for-sale security is not even reported on the income statement. Instead, these amounts are reported as a separate item on the equity section of the balance sheet.

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