Test:CPA Financial Accounting and Reporting (FAR)

1.

A marketable debt security is moved from available-for-sale to held-to-maturity securities. At the transfer date, the security’s market value has fallen below its cost. What amount is used at the transfer date to record the security in the held-to-maturity portfolio?

Cost, if the decline in market value below cost is temporary

Market value, only if the decline in market value below cost is considered permanent

Cost, regardless of whether the decline in market value below cost is considered permanent or temporary

Market value, regardless of whether the decline in market value below cost is considered permanent or temporary

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