CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

How to record an "available-for-sale" investment on the balance sheet?

A. At its fair market value
B. At either purchase price plus any acquisition costs or current market value, whichever is higher
C. At either purchase price plus any acquisition costs or current market value, whichever is lower
Correct Answer: A

At each reporting date, the short-term investment should be adjusted to the market.

User Contributed Comments 4

User Comment
Alfa1 I though we should use the lower of cost or market method here?
kalps Alfa, that is for INVENTORY not investments. Short term investments are priced at their fair market value i.e marked to market. Stock for resale i.e. that used in the business to generate economic profit is valued at lower of cost and net realisable value (market/replacement cost)
johnowens its right there in the section of the notes for available for sale securities. treat them the same as Trading securities except for the treatment of unrealized gain/loss.
ascruggs92 Lower of cost or market is for Non financial assets, meaning something that you are not buying with the intention of trading for a profit or generating interest income. An example is PP&E. You don't buy a factory with the intent of reselling at a higher value down the road, you buy it so your company can make its product.
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