The effects of price changes in marketable securities are reported _____.
A)as a gain or loss on the income statement
B)as an increase or decrease in stockholders' equity
C)either as a gain or loss on the income statement or the balance sheet, depending upon the classification of the securities
D)either as a gain or loss on the income statement, depending upon the number of shares owned

Question

Quizplus · Accepted Answer

The effects of price changes in marketable securities can either be reported as a gain or loss on the income statement, or as an increase or decrease in stockholders' equity, depending on the classification of the securities. This is because the accounting treatment for marketable securities depends on whether they are classified as held-for-trading, available-for-sale, or held-to-maturity. For held-for-trading securities, changes in fair value are reported on the income statement as gains or losses, while for available-for-sale and held-to-maturity securities, changes in fair value are reported as a component of stockholders' equity. Therefore, the answer is C.

The Effects of Price Changes in Marketable Securities Are Reported