CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following is (are) true about trading securities?

I. They are current assets.
II. They are reported at fair market value.
III. Changes in their reported value are allocated directly to retained earnings.
A. I and III
B. I, II and III
C. I and II
Explanation: Marketable securities classified as "Trading securities" are financial securities purchased with the intent to sell in the near future. They are therefore categorized as current assets and reported at the fair market value on the date of the balance sheet. When the classification of a trading security is changed, the assignation of the security to the new account is carried out at the fair market value on the transfer date, with any gain or loss reflected separately on the income statement.

User Contributed Comments 4

User Comment
sjurrens other comprehensive income
kazec When is III wrong. I thought unrealized G/L from HFT securities goes directly to NI, hence to R/E...
akirchner1 Changes in a trading security's reported value are reflected in the income statement. It may or may not end up as retained earnings if the company pays out all earnings as dividends.
sunday128 Had the same thought process as Kazec
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