How would a short-term investment in bonds to earn a return on funds that would otherwise be held as cash be classified.
A)Amortized cost.
B)At fair value through profit or loss.
C)At fair value through other comprehensive income.
D)Associate.

Question

Quizplus · Accepted Answer

A short-term investment in bonds to earn a return on funds that would otherwise be held as cash would be classified as "At fair value through profit or loss" since the investment is made with the intention of generating a profit and any changes in the fair value of the bonds would be recognized as gains or losses in the income statement. Amortized cost would not be appropriate since this method is used for investments that are held to maturity, and fair value through other comprehensive income would not be appropriate since the investment is not being held as a long-term strategic asset. Associate is not applicable in this scenario.

How Would a Short-Term Investment in Bonds to Earn a Return