Question

When the fair value of an investment in debt securities exceeds its amortized cost, how should each of the following debt securities be reported at the end of the year, given no election of the fair value option?
Debt Securities Classified As
Held-to-Maturity Available-for-Sale
A. Fair value Amortized cost
B. Fair value Fair value
C. Amortized cost Fair value
D. Amortized cost Amortized cost

Answer 1

Answer:

C. Amortized cost ; Fair value

Explanation:

Based on the information provided within the question it can be said that the Securities can be reported in two ways. Debt securities that are classified as Held-to-Maturity need to be reported as amortized costs, meaning a cost that is adjusted as it approaches face value. While Debt Securities that are classified as Available-for-Sale need to be reported at Fair Value.