Which of the following statements is correct?
A) A debt instrument purchased to earn interest will be valued at fair value.
B) A debt instrument which is purchased to earn interest will be valued at amortized cost.
C) Gains or losses on trading investments are not recorded until the trading investments are sold and the gains or losses are realized.
D) All gains and losses on fair value adjustment arising from trading investments are charged to operating income.

Question

Quizplus · Accepted Answer

Debt instruments purchased with the intent to earn interest over time are typically valued at amortized cost, reflecting the gradual reduction of the principal amount over the life of the instrument. This method accounts for the interest income earned over the period.

Which of the Following Statements Is Correct