Question

1-If the Fair Value Adjustment minus trading account for trading debt investments has a debit balance, it a. Added to the trading debt investment account to determine carrying value b. Considered to be a contra account C. Subtracted from the trading debt investment account to determine carrying value d. Reported in the other income and expenses section of the income statement. 2-when a trading debt security is disposed of, the amount of gain or loss is calculated as the difference between the cash received and the cost of the debt security disposed of. True False 3-gain on disposal of equity investments is a temporary equity account and is reported in the other income and(expenses) section of the income statement. True False 4-A preferred stock is an example of a debt security. True False

Answer 1

Solution 1:

If the fair value adjustment - Trading account for trading debt investment has a debit balance, it is added to the trading debt investment account to determine carrying value.

Hence option a is correct.

Solution 2:

False, when a trading debt security is disposed off, the amount of gain or loss is calculated as the difference between cash received and carrying value of investment.

Solution 3:

True, gain on disposal of equity investments is a temporary equity account and is reported in the Other income and (expense) section of the income statement.

Solution 4:

False, A preferred is not a debt security.