When an investor classifies an investment in common stock as securities available for sale,cash dividends are classified by the investor as:

Question

Quizplus · Accepted Answer

When an investment in common stock is classified as securities available for sale, cash dividends are classified as dividend income. This is because the investor is holding the stock with the expectation of generating a return on investment, which includes the receipt of dividends. The dividend income is reported as part of the investor's income for tax purposes. Choices A, B, and C are not applicable in this situation.

When an Investor Classifies an Investment in Common Stock as Securities