Which of the following statements is true about investments classified as trading securities?
A) The investor's intent and ability is to hold them to maturity.
B) They are valued on the balance sheet at cost.
C) They can consist of debt, but not equity, securities.
D) Changes in market value are reflected as part of net income.

Question

Quizplus · Accepted Answer

Trading securities are bought and held primarily for the purpose of selling them in the short term to earn profits. Therefore, changes in market value are reflected as a part of net income in the income statement, making option D the correct answer. The investor's intent and ability to hold them to maturity are not relevant for trading securities. They are valued on the balance sheet at fair value, not necessarily at cost. Trading securities can consist of both debt and equity securities.

Which of the Following Statements Is True About Investments Classified