ExpertEasy1 markMultiple Choice
CPA · Question 26 · Area II: Balance Sheet Accounts
Which of the following debt investments would be classified as 'Held-to-Maturity'?
Which of the following debt investments would be classified as 'Held-to-Maturity'?
Answer options:
A.
The company has the positive intent and ability to hold the bonds until they mature.
B.
The company intends to sell the bonds if interest rates change.
C.
The company trades the bonds actively for short-term profit.
D.
The company holds the bonds but may sell them for liquidity needs.
How to approach this question
Recall the criteria for HTM: Positive Intent AND Ability to hold to maturity.
Full Answer
A.The company has the positive intent and ability to hold the bonds until they mature.✓ Correct
A
Held-to-Maturity classification requires both the positive intent and the ability to hold the securities to maturity. Tainting occurs if sales happen.
Common mistakes
Thinking 'intent' is enough without 'ability'; confusing with AFS.
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