When a bond classified as available for sale has suffered

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Reference no: EM132789433

Problem 1: When a bond classified as "available for sale" has suffered impairment:

a. A loss is recognized using the CECL model

b. A loss is recognized that CANNOT exceed the difference between the amortized cost and the market value.

c. No loss is recognized because the company will sell the bond immediately.

d. A loss is recognized as "Other comprehensive income".

Problem 2: A company (Investor) has an investment in common shares of another company (Investee). The investment represents 10% of the common shares of Investee.

a. The investment, as it is less than 20%, CANNOT be accounted for under the equity method.

b. If Investor has the ability to exert significant influence over Investee's operations, he may use the equity method if he wishes.

c. If Investor has the ability to exert significant influence over Investee's operations, he must use the equity method.

d All investments in equity securities are carried at market value, regardless of whether or not the Investor has the ability to exert significant influence.

Reference no: EM132789433

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